Thanks, this was just what I needed =)
And this should be the default behaviour of WordPress, IMHO.
Use filters.
http://codex.wordpress.org/Filters
There’s a filter hook “list_cats”.
You can make your own ‘functions.php’ (which is auto-included), like the default theme does.
It helped me to put:
$this->query(‘SET NAMES UTF8’);
in wp-db.php line 57 (just before the “$this->select($dbname);”).
It’s a new site, though, so I’m not fully aware of the problems that could arise with the already-in-db texts.
I’m a Lithuanian too, btw! =)