That's right: It lags the site by quite a bit and it's missing a number of "secret sauce" features that PG doesn't want people to know how to game.

I'm pretty certain search is done using an outside service and is not in the released source...

It's done by the octoparts team IIRC. It's an external service they sell that HN gets for free. (Again; IIRC.)

EDIT: From the "news news" page: (http://ycombinator.com/newsnews.html)

We now finally have search for HN, thanks to Octopart, who've been working on it for a while as a test of their new search database, ThriftDB. You'll see a search box at the bottom of most pages.

Sorry this took so long. For a while we hoped to implement our own search, but it became apparent that would take a lot of work to do right. So we were delighted when Octopart decided to get into the search as a service business.