It would appear it’s a problem with iTheme itself. I’ve upgraded to WP 2.2.2 and iTheme 1.1 — I get the same all-mushed-together Blogroll widget. However, if I switch to a different theme, it does what the Links widget is supposed to do: If you have your Blogroll links into specific categories, it makes a seperate widget for each of them.
I have no idea how to fix it, but a workaround is to make your own widgets for each category. When I figure out how to easily do that I’ll post it here.
