The Categories issue is only present in 4.0 and above. Works fine on my iPad running 3.2.1, but it's been a problem since day one on my iPhone 4. I read recently it was resolved, but that's not the case on mine unfortunately. I gave in and bought FolderEnhancer today because of this one problem; hopefully the dev will follow through on adding support for folder icon replacement soon.
It can also be an issue if you have the App Store in your SBSettings dock.