This is a cool idea for a widget - thanks.
My only gripe is that after drilling down into some categories and their children, and clicking on a category - I wish that the widget would already be expanded as much as needed be so the current category would be displayed (and probably indicated as the current category).
Additionally, it would be nice if when viewing a post that's in category foo, this widget would be expanded far enough to see category foo as well.
Does that make sense? Thoughts?