I've been working on something similar to this, instead of using HTML I'm building XML that flash is parsing and building a category tree thats browsable without making the clients browser referesh on every click, so far I don't have a demo up, as the client I was doing it for, his hosting provider had an HD crash and lost all my work, so I'll be rewriting this, and hopefully will have a preview. This could be achieved also with some DHTML, it would really be a matter of spacing the menu out, as I've left the basic cat on the left and added my flash category's to the middle area above featured products. This is sorta similar to how macromedia.com's side nav bar works.
None, the less, this is a great HTML mod for the categories, kudos derrick!