Menu 2 personalization

I am sure I am missing something simple here but can't find an answer in any of the threads. I am using Wordpress 3.3.1 and Atahualpa 3.6.7

From what I understand using the Wordpress menu options I am able to create 2 menus, 1 being shown in Atahualpa as Page Menu, which works perfectly as it is included in the header set up (%pages), the other being shown as Categories or Menu 2. I have created a Menu 2 in Wordpress and added it as a Custom Menu via the widget plugin but cannot manage to personalize it. It just displays as a normal WP vertical menu with grey blocks and small text. I would like to be able to personalize this menu as well as the Pages but nothing I add to the Atahualpa Menu 2 set up makes any difference to how the menu displays. I am guessing I need to add %cat-menu somewhere but don't know where as this menu is in widget in the side bar and not in the Header.

The site by the way is http://gocabrera.com
Thanks in advance

Adrian