I found the issue with the plugin conflict. The plugin you are using stole away the default $ in jQuery without using a no conflict. I added a little hack to my plugin which should prevent your other plugin from breaking mine.
As far as the categories, I rebuilt the way that categories are parsed to make it more forgiving.
These changes have been published to 1.2
If you still have trouble send me some more detailed information Like:
The categories you are trying to use
The number of links in each category
If the problem is isolated to one widget or site wide
If the problem also happens when using the shortcode
Just some preliminary stuff to try to narrow it down.