When a new post is published, it's always categorized as "uncategorized" (at least temporarily) no matter what category you choose.
If you use the subscribe2 plugin, all your users will get emailed the WRONG permalink. If you want to fix this, you have to edit your htaccess for every single post and 301 it to the correct category permalink.
ALso, note that if you DEACTIVATE the plugin, all your permalinks get messed up.
SO, a word of advice - DO NOT INSTALL THIS PLUGIN.
I've posted on the forums, I've posted on the author's forums and I've emailed the author directly, no response from any of it. It seems safe to assume that this plugin is dead.