like many other wp-users i had problems with the tlc-plugin after upgrading to wp 3.1 ... i got 404 errors on category sites.
I tried the bugfix-plugin from FolioVision:
FV Top Level Categories
... but it didn't work for me ... maybe it depends on my server configuration? Maybe it depends on the lines with "$wp_rewrite->flush_rules();" ... some blogs reported, that deleting / commenting this line in plugins could solve the problem (just as a quick fix). Didn't work for me.
I finally found another plugin, that at least works fine for me:
WP No Category Base,
Maybe it works for other users and saves some hours, too.