Searching Listings by keyword or location, not just category?

Here's the URL in question:
http://sukha.creatrixdesign.net/devsite/classifieds/
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My goal:

1. User hits "Classifieds" tab.
2. User encounters searchable page of ads
3. User clicks into ad(s) matching his/her search parameters.

At this time, user is directed to long, (unsearchable?) list of ads. Not so helpful, y'know?

My questions:

How do I get Classifieds categories to list on http://www.mywebsite.com/classifieds/ ? It seems that this page is automatically populated with individual listings. If I can change this, I'd love to hear how to make that happen.

Is there a way for my users to search Classifieds BESIDES through categories?

Thanks a bunch! High fives on a fabulous Saturday.

-A.