The following code looks like it does most of what you want.

use strict;
use warnings;

die "No search terms supplied!" unless @ARGV;

my %targets;
my ($prePost) = $ARGV[0] =~ /^(\d+)$/;
my @words = split /(?= )/, do {local $/ = undef; <DATA>};
my @tags;

shift if defined $prePost;
$prePost = 5 unless defined $prePost;
map {$targets{$_} = (0)} @ARGV;

for (0..$#words) {
  $words[$_] =~ s/[\r\n]+/ /;
  my $curr = $words[$_];
  my ($pre, $word, $post) = $curr =~ /([^\w]*)(\w*)(.*)/;
  if (exists $targets{$word}) {
    $words[$_] = "$pre<$word>$post";
    push @tags, $_;
  }

  next if ! @tags or $tags[0] > $_ - $prePost;
  print "".(join '', @words[$tags[0] - $prePost .. $tags[-1] + $prePos
+t])."\n";
  @tags = ();
}

print join '', @words[$tags[0] - $prePost .. $#words] if @tags;
[download]

__DATA__
Regular expressions have always been a weak spot for me, and I've got 
+a
 question that's got me stumped. Here's the problem I'm trying to solv
+e.
 I have somewhat large articles of text (returned from a search), what
+ I'd
 like to do is capture the word and X number of words before and after
+ it
 while tagging the matching word in the captured text. My inital thoug
+ht
 was to try something like this. The problem I have is that if there i
+s
 more than one term and they overlap, the nth term will not be annotat
+ed.
 So my next thought is lookahead/lookbehind, but they don't capture.
 Is there a way to do this with a single regex? Is a regex even the be
+st
 way to do this? Thanks, -Lee
[download]

Prints:

 a weak spot for me, <and> I've got a  question that's
 that's got me stumped. Here's <the> problem I'm trying to solve. 
 what I'd  like to do <is> capture <the> word <and> X number of words 
+before
 X number of words before <and> after it  while tagging <the> matching
+ word in the captured
 tagging <the> matching word in <the> captured text. My inital thought
+ 
 this. The problem I have <is> that if there <is>  more than one term 
+and
 <is>  more than one term <and> they overlap, <the> nth term will not 
+be
 annotated.  So my next thought <is> lookahead/lookbehind, but they do
+n't capture. 
 regex? Is a regex even <the> best  way to do this?
[download]