Blogs MU 1.0 Categories in a Sub Blog

1. Create a Blogs MU 1.0 Site (e.g. abc.com)
2. Create Some Categories with Avatars
3. Create a Blogs MU 1.0 Sub Site (e.g. newsite.abc.com)

The categories appear on the Home Page of the Sub blog and the Avatars are the Generic Images.

My First and main Issue is that the Categories of the Sub blog should be independent of the master site. I assume I missed an option somewhere.

Second, assuming there is an option to include or exclude master site categories they should inherit the proper path to the image.

Last, Is there any way to Include Titles for the Categories Over or Under the Avatar. Users have to hover to get an Idea what the Avatar is about and I don't want to put text into the image because of the sizing.