I wanted to add a follow-up here to say that I did end up creating a category/subcategory system using Tagger, and I will never do it again. It was a nightmare to say the least - it was just never meant to be used that way. I won't go into the details, but suffice it to say, after modding the built-in snippets, creating convoluted ways to make menus and titles using querystrings, and having to create a whole separate system to enter meta descriptions for each category page, I implore you, don't ever consider using the Tagger plugin. For anything really.
Instead, even though it has its own share of problems, I used the Taxonomies (https://github.com/craftsmancoding/taxonomies
) plugin on the next site that used products. It actually works much closer to how the Wordpress taxonomies system does, and offers much more flexibility.
Like I said, it isn't a mature option - yet - so if you need this functionality for your website, and let's face it, who doesn't nowadays, buy the author a beer to help motivate continued development. Or if you are a whiz, start helping with bug fixes and updates.