Actually the search features are very much improved with vBulletin 3.7. Instead of having to rely on word-index table, this version leverages MySQL's fulltext indexing which (in theory) allows the search for anything. The ability to quote your search term is also new, as you've noticed.
The 5 character minimum limit prevents tiny word searches from bogging down the forum for everyone -- though there is also a 500-result limit also in place to prevent that. So you can't search for "bad" but you can search for "bad mojo".