I can't find any integration of Kitten's show/hide categories plugin in 1.5, which is a bit of suprise (it may just be me not looking hard enough). Anyway, in the absence of an apparent solution I've made minor modifications to her show_categories plugin which appears to make it compatible with WP 1.5.
It seems to have been a table variables issue, i.e. changing all references to $tableposts to $wpdb->posts and $tablepost2cat to $wpdb->post2cat appears to have done the trick. I think that the global variable declarations for $tableposts and $tablepost2cat at the top of both plugin functions were no longer relevant so I removed them. I suspect WP1.5 contains native functions which could improve the efficiency of the script for parsing the cats array but I'll leave that job to someone who knows 1.5 better than me:)
I include the modified show_categories plugin script below. It would be nice to find this as standard WP functionality in the near future (or that I was wrong and it's actually already there but undocumented) because it increases template design flexibility no end.
[Moderated: Script code removed. Please use http://paste.uni.cc to post long code examples.]