They have done this using an image.
Put in:
[img]{$ImagesDir}/separator.gif[/img]
at the end of the display category line in categories.tpl so that it appears as:
Code:
{* $Id: categories.tpl,v 1.18 2003/02/25 08:58:46 olga Exp $ *}
{capture name=menu}
{if $config.General.root_categories eq "Y"}
{section name=cat_num loop=$categories}
<font class=CategoriesList>
{ $categories[cat_num].category_name|escape }</font>
[img]{$ImagesDir}/separator.gif[/img]
{/section}
{else} {section name=cat_num loop=$subcategories}
<font class=CategoriesList>
{ $subcategories[cat_num].category_name|escape }</font>
{/section}
{/if}
{/capture}
{ include file="menu.tpl" dingbats="dingbats_categorie.gif" menu_title=$lng.lbl_categories menu_content=$smarty.capture.menu }