Here is what I did to add a category icon instead of using the text for categories.
I created another field in xcart_categories table using phpmyadmin. I called it: category_image Type=VARCAR (255) I set it to NULL.
Then I just edited the table through phpMyAdmin and for each main category I added: yourwebsite.com/store/files/Fulfillment staff/product_images/WhateverYouWant.jpg (This is where I store my images for X-Cart).
Then in categories.tpl Between the {section name=cat_num loop=$categories} and {/section} I added this line
Code:
{$categories[cat_num].category_image}
I used category_image because that is the name of the field in my database.
I know there are probably other ways of doing this, and there are probably posts on this, I didn't even check

Hopefully someone might find this useful, I imagine you can use this for the subcategories too, just modify the loop for subcategories.
PLEASE if there are any errors or comments, POST IT- I just started using X-cart about 2 months ago or something so I am not an expert by any means.
Mike