DogByteMan (and anyone else following this thread!).
I'm on Xcart 4.1.8 and had the same problem, the issue when using nevets code is that it references the
$allsubcategories variable, and this isn't in the default categories.php code for this version (or it wasn't in mine at any rate!).
To add it in follow the steps outlined in this post:
http://forum.x-cart.com/showthread.php?p=178560#post178560
Once you've done that Using Nevet's menu.tpl code and Intel's javascript and css it all works very nicely in 4.1.8, I've checked it on the following browser/OS combinations with no problems:
FX2.0.0.11, Vista
FX2.0.0.11, Ubuntu
FX2.0.0.11, Mac Osx
IE7.0.6000, Vista
Safari 3.0.3, Vista
Safari 3.0.4, Mac OSx