Add a few lines to the media_categories_meta_box function and the css file to make the categories box look "pretty."
In media_categories_meta_box, replace the first <div> with:
<div id='categorydiv' class='postbox'>
<div class='inside'>
make sure to close these div's at the end.
In media-categories-style.css, add
.media-upload-form .postbox {
width: 460px;
}
Also, I didn't like the fact that it was putting the checked terms on top, so when I called wp_terms_checklist(), I passed in the option 'checked_ontop' => 0. Would be nice if you split out the hardcoded array being passed to wp_terms_checklist instead into a $args variable, and included this option in it.