It turns out that the problem is that it does not do substring searches.
So:
Searching for gedit (full string) finds results
Searching for ged (partial string) does not
** Changed in: apt-xapian-index (Ubuntu)
Status: Incomplete => Triaged
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Intrepid: Xapian fails to find package when using quick search
https://bugs.launchpad.net/bugs/261423
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