Categories in K2 ?

Use extended live archives. You can see what it looks like at my site: http://www.hisnameisjimmy.com

It’s an easy plugin to use, although I had to eliminate the ‘show number of comments’ option, because it crowded the look of it.

In order to get it in the sidebar, I think you have to use a module of some sort. K2 still needs work, and we are working with beta stages.