This should link your thumbnail.
{if $subcategories[cat_num].category}{assign var="tmp" value="1"}{/if}
{/section}
{if $subcategories}
<TABLE border="0" cellspacing="5">
{foreach from=$subcategories item=subcat}
<TR>
<TD align="left" nowrap width="95%">
[img]{if $subcat.icon_url}{$subcat.icon_url}{else}{$xcart_w eb_dir}/icon.php?categoryid={$subcat.categoryid}{/if}[/img]
<FONT class="ItemsList">{ $subcat.category|escape }</FONT>
</TD>
<TD align="right" nowrap><FONT class="Text">
{if $config.Appearance.count_products eq "Y"}
{if $subcat.product_count}{ $subcat.product_count }
{$lng.lbl_products} {elseif $subcat.subcategory_count}{ $subcat.subcategory_count } {$lng.lbl_categories|lower} {/if}
{/if}</FONT></TD>
</TR>
{/foreach}
</TABLE>
{/if}