Sub-Categories for joomla are here!
I've hinted about this new uberextension before but now its here and available for download.
“climb every (Joomla!) mountain with K2”
There is a very impressive feature set
K2 is extensible with additional fields to its base content form. That means you can add as many content fields as you want and create category-specific content items, e.g. article, blog post, product page, directory listing. K2 offers as standard: nested-level categories (no section/categories problems here!), comments, tags, item image (useful for articles/catalogs), galleries, videos, attachments, user profiles, ajax-based frontend editing and more!
With this one extension you can throw away numerous plugins, modules and custom hacks.