One of my all time favorite mods, but if you have your images in the filesystem (which is recommended for speed reasons) this mod will continue to pull the images from the db, as it is hard-coded in. To fix this, replace this:
Code:
[img]{$xcart_web_dir}/icon.php?categoryid={$subcategories[cat_num].categoryid}[/img]
with this
Code:
{if $subcategories[cat_num].icon_url}[img]{$subcategories[cat_num].icon_url}[/img]{else}[img]{$xcart_web_dir}/default_icon.gif[/img]{/if}
You'll want to add in a height or width as well, as this will pull the full-sized image without it. You should notice a huge speed improvement on your category pages, particularly if you have a ton of sub-categories. The {if} statement simply shows the default_icon.gif image if there is no sub-category icon present. Enjoy!