"Add new category" on post page broken

[ericabiz]

When I add a new category on the Manage->Posts->post page, the link is broken (if I don't select a parent category.) Adding a new category via Categories works, though. Tested on Firefox 3/Win, IE7/Win, and Safari/Mac, all with same result.

Example of broken display

The attached image shows an example of how the category display breaks if a sub-cat is selected for a post. The A1 category should be shown as a sub of A, but it's shown at the top level.

Also worth noting that if you add your new sub-cat from the write->post page, it causes the list of cats to be displayed twice.

Let's track this via #7000