Category base not working

I am sorry to say, but the troubleshooting has not helped me.

Category pages aren’t working. They simply show up main page.

My loop is

<?php $temp = $wp_query; $wp_query = null; $wp_query = new WP_Query(); $wp_query->query('tag=featured'.'&paged='.$paged); ?>
				<?php  while($wp_query->have_posts()) : $wp_query->the_post();?>
				<!--  while(have_posts()) : the_post(); -->
				<?php if( get_post_meta($post->ID, "thumbnail", true) ): ?>
				<a href="<?php the_permalink() ?>" rel="bookmark"><img class="thumb" src="<?php echo get_post_meta($post->ID, "thumbnail", true); ?>" alt="<?php the_title(); ?>" width="70" height="70"/></a>
				<?php else: ?>
				<?php endif; ?>
				<h1><a href="<?php the_permalink() ?>" rel="bookmark"><?php the_title(); ?></a></h1>
				<?php the_content_limit(140, "[".__("Read more", 'studiopress')."]"); ?>
				<hr/>
				<?php endwhile; ?>
				<div class="pagination">
				<div class="palignleft"><?php previous_posts_link('&laquo; Previous Page') ?></div>
				<div class="palignright"><?php next_posts_link('Next Page &raquo;') ?></div>
				<?php wp_pagenavi(); ?>
				</div>
				<?php $wp_query = $temp; ?>