You must do the following:
1. Create the categories via Forum Settings found in the Primary Settings dropdown list.
2. Assign ALL your forums to a category. Also done via Forum Settings.
3. Then in the Primary Settings dropdown list select General Display Settings.
4. On the General Display Settings page about 3/4 of the way down there is an option called "Category Display Option", make sure it is set to YES.
That should do it. If you've done all the above, please double-check. If you're still having the same display problem, please post a url to your board and include the board version #.