This is probably too late, but I had this same problem and here was the problem (and a hint towards the solution):
http://wordpress.org/support/topic/112598
I’ll post .php code when I finish and test it (for the posterity, I suppose).
I have this same question – what is the easiest/most robust way to change my blog such that I have a categories “view”. That is, when I click on category A, the side panels reflect the contents and nature of category A and not stuff from the rest of the blog irrelevant to A.
