Yes, they do. They're not meant to completely avoid each other, theoretically there's a Z-axis that's not visible.
Try increasing the collision avoidance importance in the options and decreasing everything else. Generally, playing with the sliders can result in completely different behaviors.
The attraction to the center seems to produce very erratic pathing - cutting that to zero immediately makes the flocking effect more 'natural'. Then increasing the acceleration factor helps produce those instantaneous changes of direction that are characteristic of animal flocks. With the current defaults the behavior is more 'cloud of flies' than 'flock of starlings' - which is fine, but doesn't show off the large scale co-ordinated movement the boids algorithm can produce. The collision avoidance threshold seems a little high - a slider to reduce that would help make flocks more compact which would produce better behavior when the number of boids is high...
Truth is I didn't spend much time choosing the default values. And there are still a few configuration variable in the code that are not accessible through the GUI.
Another great take on an HTML5 flocking implementation is Alex Cruikshank's "birds on a line" demo, in which the birds also "land" on wires. I really like how Alex handles 3-dimensionality by adjusting the darkness of the birds so that the further "back" they are, the lighter they appear.
In my experience tweaking the variables, to make it look 'realistic', the settings need to change as the number of boids increase. So what might work for n boid, won't work for m boids, where m >> n.
In addition, you need to limit the turn angle for the boids. They don't look like they're flocking as much as they're orbiting. Just as birds can't turn on a dime (actually, they can. I've seen a sparrow change direction in mid-flight just as I was going to hit it with my car going 40 mph, but for the purpose of flocking it looks better when they can't.), you don't want your boids to, so you get a swooping effect and feel.
Also because I'm not great with my vector maths you'll spot that the boids have some odd behaviour where they favour vertical movement. Strange little bug.
Any similarities to the bird flocking algorithm when compared to a force directed graph? Here's a link to a force directed graph I did in HTML5: http://amirrajan.net/Home/FdgHtml5
It's the number of neighbors each boid considers to calculate its velocity. There's also an option that defines the maximum distance for collision detection, but it's not accessible through the UI.
Do they have awareness of the other boids around them?