Same problem here. I was able to get it to work by firing up my copy of IE 7 (WinXP OS). The ajax worked. Weird. I don’t want to have to use IE but one keeps it around for just such situations.
Normally I’m using firefox 2.0.0.3 – I never saw the dialog box “Are you sure you want to navigate away from this page?” until I tried to add a category. I can edit the two that existed from the install, but nothing else.
I just did a fresh scrub and install of WordPress 2.1.3 on my midphase account via their fantastico service.
Sounds like something, somewhere between WordPress 2.1.3 and firefox is not getting along well.