I am having problems with both %%category%% and %%category_description%% taxonomies.
2 different problems.
With CATEGORY, the problem is that I am using WPML plugin on a website, to translate everything. Using CATEGORY to show it in POST TITLE (sth like "name of category: title of post") I found working great in default language, but for foreing languages I find always CATEGORY @LANGUAGE (ex: category @en - for english language translation of that category). This is done by WPML plugin ,but normaly it should not happen, showing simply the english text, translated, for that category name.
In this forum URL you can find discussion about it. WPML team suggested me to ask you the WP SEO code which displays the categories in title.
Second problem: %%category_description%% this taxonomy, simply, doesn't work.
PS: I use last versions of all plugins
Thanks a lot! ;-)