MrSoft,
I don't use category images but you could try
prodImage='{<img src="{if $current_category.icon_url}{$current_category.icon _url}{else}{$xcart_web_dir}/image.php?id={$cat}&type=C{/if}" alt="{$current_category.name}" style="float: left"/>}';
You would have to add the
'+prodImage+'
back in to the
var p0=('<a href="{$http_location}/home.php?cat={$cat}"><br/><b>{$current_category.category}</b></a><br /><br />');
Like this
var p0=('<a href="{$http_location}/home.php?cat={$cat}">'+prodImage+'<br/><b>{$current_category.category}</b></a><br /><br />');
You also have two </head> 's on your pages.
edited to add:
I forgot about the page views when you select a manufacturer so I changed what I added to the bottom of products.tpl I also decided to use the location information so that my subcategories made more sense. I'm not using the image for this and I use a different page for the search results. You would have to change this is you wanted to include recently viewed search results.
{if $cat le '0'}
<script type="text/javascript">
var p0=('<a href="{$http_location}/manufacturers.php?manufacturerid={$manufacturer.ma nufacturerid}"><br/><b>{section name=position loop=$location step=-1}{$location[position].0|escape}{if not %position.last%} - {/if}{/section}</b></a><br /><br />');
</script>
{else}
<script type="text/javascript">
var p0=('<a href="{$http_location}/home.php?cat={$cat}"><br/><b>{section name=position loop=$location step=-1}{$location[position].0|escape}{if not %position.last%} - {/if}{/section}</b></a><br /><br />');
</script>
{/if}