In Outlook 2007 there is a way to simulate subcategories. Simply create
certain categories that you deem to be major categories (might want the
prefix them to keep them all together) and then create subcategories (which
you could also prefix if desired, but may not want to if used with many major
categories). Now assign items with both a major and minor category, or with
almost any combination of major and minor categories as desired. Now use the
advanced 'Search' feature and designate the exact combination of major
categories and minor categories that you want to view.
This approach can be very useful, but under certain conditions a rigid
hierarchy of categories and subcategories would be more useful. Perhaps,
Microsoft will add the ability to LINK and UNLINK categories one day so that
the user can customize the category pool into either a rigid hierarchy, a
loose set of keywords (current method), or a combination of both.