Let me add that the other categories, Featured, New, and Popular all display properly beneath the one that is having the problem. It's just the top one that displays incorrectly. Also when I click on any of the categories it just dumps me back to my home page.

Well it seems that the display problem is only when logged in as Host, not Admin, or registered user. To fix the problem with the category menu dumping me back to the home page I had to set the display page to the actual name of the page, whereas it was set to Same Page before. Now clicking the category links works normally. I am not sure what the deal is with being logged in as Host and having the display problem, but everything else seems ok now, but I have yet to add any new products etc.