Hmm, the category tree wasn't changed in version 5.0.5, really
All users who can access DownloadsII (can view files), can view the category tree. The category id info between brackets is only shown to users with "Can edit all files" permissions.
The layout change you suggest isn't possible without changing the PHP code as it's using the construct_select_array() function, which is also used for the category select dropdown menus.