Creating taxonomies in Custompress and categories in Directory

Alright, after spending an entire day on this madness, I felt the next best step would be to finally seek help with this situation. Here is my question:

After installing the newest version (as of 3/1/12) of both Directory and Custompress, I am struggling to understand the relationship between "Taxonomies" in Custompress and "Categories" in Directory. Do I need to create both Categories AND Taxonomies?