Michael, I posted this just in another thread, so sorry for double-posting:
This is definitely either an undocumented feature change or a bug in WP 2.8 as the get_categories() function can not retrieve any categories when used inside functions.php - anywhere on the front-end is fine.
To test this, include the following code to the very top of a functions.php file:
Now, as you know, this should print out an array containing all categories on the site.
Try this on 2.7.1 and all other older versions, the code works correctly by printing out:
 => stdClass Object
[term_id] => 3
[name] => Tutorials
[slug] => tutorials
[term_group] => 0
[term_taxonomy_id] => 3
[taxonomy] => category
[parent] => 0
[count] => 5
[cat_ID] => 3
[category_count] => 5
[cat_name] => Tutorials
[category_nicename] => tutorials
[category_parent] => 0
However in 2.8, the following is output:
[errors] => Array
[invalid_taxonomy] => Array
 => Invalid Taxonomy
[error_data] => Array
As I stated, the code works fine in front-end files, but not in the back-end.
This is not a problem with a theme or plugin error, as exactly the same problem is seen if you add the code to the default WordPress themes.