From the author of Atahualpa, the #1 most downloaded (700,000+) theme @ wordpress.org
Feb 26, 2010, 09:57 PM
4 posts · Feb 2010
Seriously, they won't.
I try to make child categories out of my parent categories, but instead they are part of the list. Meaning, they are added to the list of the parent categories. The reason why I chose Atahualpa was to have child categories.
What you are looking at (in the left sidebar) is a widget. This 'category' widget is one ot the default widgets that come with wordpress. It has nothing to do with Atahualpa. You might want do a google searchusing 'wordpress plugin category' and try out some of the ohter plugins to see if you can find one that will serve your needs.