When Ted Demopoulos asked, over at Blogging for Business, “I notice that Chris Abraham’s Marketing Conversation seems to have like a hundred [categories], and I like how it’s done, but is it an effective use of screen real estate? It obvious works for him, as do my 18 categories for me,” I responded, “I have to say that I don’t endorse my own strategy. I am a shameless SEO slut and so I have a tendency to focus more on using Categories and Tags as a tool for folksonomy as opposed to what Categories are supposed to be, which is user-navigation, UI, and Taxonomy.”
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If you create a tag cloud, it might prove problematic. But it would also weight the categories to make it more user-friendly as far as navigation.