At what point does search quality degrade to the point where is becomes a bug?

A bug is when actual behavior does not match stated or intended behavior. If the search bears little connection to what was searched for, then it is a bug, as far as the user is concerned.

Or maybe you mean to say we should reserve the word bug for deviations that are unintentional?

Later in the article he uses "quality blindness" instead, which is probably a better description of most of the issues he talks about.