I am looking for this as well. Perhaps a plugin that lets you associate an image with each category and show that instead of a text link?
Ive put an image in the sidebar by hosting it on imageshack.us but i cant seem to get it totally on the page… the image is justified to much to the right so its not aligned… any help?
For original post questions: In WP 2.3 this is possible via Manage Blogroll – Advanced – Image Address
For followhard: You really should start a new topic and not hijack a thread, however, the answer lies in your CSS for placing the image correctly.