Sidebar customization issues

Hi,

I have 2 questions..

1: Why is it that I can only edit my theme with the theme editor? Why don’t the sidebar widgets work?

2: I have added a new category to my blog. How do I add this category to my sidebar? Meaning, something like below:

Category Name
=============
Post 1
Post 2
Post 3

How do I make it look like the above? Thanks in advance for any help.