The short answer is that you can't. Categories (and locations)  are Portal wide.

I made this change to my calendar source code but will most likely need to recode it again when I upgrade to the new Event version.

I remember this change being tedious but not difficult. You need to track to track down all the category gets and saves and replace "PortalID" with "ModuleID".

I join the Category description and Category color to the Event when I retrieve it from the database. I can see what category a sub-calendar event belongs to but I cannot filter by it using the drop down box.

I have an unfinished stored procedure that I was working on that would populate the category dropdown box with master and sub-calendar categories. Because of the way we use the calendars this isn't a high priority for us.

By the way, to those out there that are changing the category source code. The first thing you should do is to change the existing code so that everything is keyed off of the Category identity field rather then the category description. Otherwise strange things will happen if you have two categories with the same name.