Just to update - I re checked and this is very strange, Clear the cache, rebuild category index in xcart, then refresh the page - and the url friendly Category links are there domain.com/shop/blue-widgets/ , BUT - refresh the screen the screen and the links revert back to eg -
www.domain.com/shop/home.php?cat=27
Ive no idea what is going on :- .htaccess in shop directory :- (this only affects directories - it doesnt affect static pages or product urls)
DirectoryIndex home.php index.php index.html index.htm
RewriteEngine on
RewriteBase /shop/
RewriteCond %{REQUEST_URI} ^/[^\.]+[^/]$
RewriteRule ^(.*)$ https://%{HTTP_HOST}/$1/ [R=301,L]
# ------------------------------------
# XC Security
# ------------------------------------
# block all files with uppercase names (i.e. VERSION)
RedirectMatch gone ^/[A-Z].+$
# block all smarty templates (no reason to have these exposed)
RedirectMatch gone ^/.*\.tpl$
# block all .php and .pl files in the root directory except for index.php
RedirectMatch gone ^/[^/]*([^index])\.(php|pl)$
# block the entire log directory
ReDirect gone /log
# block all .log (log files), .sql (sql dump/export) and .conf (config files) files
RedirectMatch gone ^.*\.(sql|log|conf)$
# block access to the 'Smarty-*' directory
RedirectMatch gone ^.*Smarty.*$
# block access to /upgrade
Redirect gone /upgrade
# block access to /skin1_original
Redirect gone /skin1_original
# block access to the /sql directory
Redirect gone /sql
# block access to the /shipping directory
Redirect gone /shipping
# block access to the pgp directories
Redirect gone /.pgp
Redirect gone /.pgp.def
# ------------------------------------
# CDSEO
# ------------------------------------
RewriteCond %{REQUEST_URI} !^/(payment|admin|provider|partner)/
RewriteCond %{REQUEST_FILENAME} !\.(gif|jpe?g|png|js|css|swf|php|ico)$
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteCond %{REQUEST_FILENAME} !-l
RewriteRule ^(.+)$ /shop/cdseopro.php
# ------------------------------------
# Caching
# ------------------------------------
<IfModule mod_expires.c>
ExpiresActive On
ExpiresByType image/jpg "access-Indexes plus 1 year"
ExpiresByType image/jpeg "access plus 1 year"
ExpiresByType image/gif "access plus 1 year"
ExpiresByType image/png "access plus 1 year"
ExpiresByType text/css "access plus 1 month"
ExpiresByType application/pdf "access plus 1 month"
ExpiresByType text/x-javascript "access plus 1 month"
ExpiresByType application/x-shockwave-flash "access plus 1 month"
ExpiresByType image/x-icon "access plus 1 year"
ExpiresDefault "access plus 2 days"
</IfModule>