Ah yes, the infamous error that everyone (including me) seems to be getting with some 2.x versions of wordpress when trying to add a category.
Just out of sheer luck tonight I found the answer to all of your worries!
All I did was install the “Category Overload” plugin and all was fixed. I was so excited as I wasn’t expecting it to fix anything!
Plus now you get a few extra features when adding categories.
Here’s the link: http://wordpress.org/extend/plugins/category-admin/
EDIT: I must add that unfortunately this does not fix the error when trying to add categories while posting.
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