1.5: I only know how to do this in 1.5 (not because it can’t be done in 1.2, but because I really only know anything about 1.5).
I’m glad you specified this was within a post. That makes things different (and harder). Without gettting into custom SQL queries, the only way I know of to get a list of Posts is to use the Loop. Since you need a list of Posts, within a Post, that means you need a Loop inside a Loop. This is doable, but gets quite complicated. More so if these posts of yours are filed under multiple categories (instead of just one category each).
Fortunately there is a plugin that will generate the custom SQL for you. Customizable Post Listings.
Do you want this to happen with ALL posts? If not, it’s a bit harder yet – you’ll need custom fields (aka meta data), or some really sneaky category magic. Supposing you want this to happen to ALL posts, though, and supposing you’re using the default (as in Kubrick based) theme, edit index.php:
Under the </div> closing the class="post" div (just above an endwhile, insert the following.
<?php
$my_cat_ids = "";
foreach ( $category_cache[$post->ID] as $my_cats) :
$my_cat_ids .= $my_cats->category_id . " ";
endforeach;
?>
<ul class="posts-in-cats">
<?php c2c_get_recent_posts ("-1", "<li>%post_URL%</li>", $my_cat_ids)?>
</ul>
The first section generates a “space separated list” of the category IDs for the current post: “1 10 34”. This is the part I’m a little sketchy about; I don’t know if category_cache is the best way to go about this.
The second section generates the list of links to posts in those categories (-1 for “do not limit the length of the list”).
EDIT: Ah – in rereading your post, it sounds like you need to be able to specify the category from which to generate a list of posts. The above grabs the categories from the current post. The best way to do this is with custom fields. I don’t have time to write up anything at the moment.
…Perhaps there is a plugin for this?
