Hey Downfall,
I think the problem is you made too big of a jump in WP versions. There are often database differences between WP versions, and 2.6 seems to assume certain database upgrades have already taken place. If it’s possible to put your site back to 2.03 (via a backup), I would recommend you do that. Once that’s done, you should upgrade incrementally until your site is running at least 2.3.
Anyway, here’s a fix for the category issue:
Category Issue
Good Luck!
Dave