Here's An Update on this problem:
I have been looking at this problem since last night ( WOW what a way to ring in the New Year) or as my kids would say "what a nerd" in a loving kind of way. I have determined that it is this Hack that has caused the problem and just to prove to my self I reinstalled PP without this hack and pointed it at the same data and it works... or should I say that it correctly represents the hierarchyof the Catagories.
Here's a screen shot of the unhacked PP;
The Offending Code seems to be in index.php.
Anybody seen this issue or is it just me? If it is just me can anyone tell me where to look to correct this error.
Thanks.
And Happy New Year's From Boston.
Kevin