In Edit Post, Menus, the Categories Widget lists all categories, but in Appearance\Menus, the Categories widget doesn't list all categories.
Instead all the categories and the relationships are mashed up in one array of A-Z sorted categories, broken down into sections of 41 categories.
You have to click "1", "2", etc. to see the next categories.
The additional problem with this, is that as all categories are alphabetized, the relationships are destroyed, and thus creating a menu reflecting these relations are now impossible.
Example of correct display in Edit Post\Categories:
Insects Lepidoptera Butterflies Moths
Birds Anatidae Ardeidae
is mashed up to this in Appearance\Menus\Categories: