Did you upload the categories images?
If you are still having issues. Replace the js/custom_uploade.js with this
jQuery(document).ready(function() {
var fileInput = '';
jQuery('.upload_image_button').click(function() {
post_id = jQuery('#post_ID').val();
if(post_id > 0){
fileInput = jQuery(this).prev('input');
//console.log(fileInput);
formfield = jQuery('#upload_image').attr('name');
tb_show('', 'media-upload.php?post_id='+post_id+'&type=image&TB_iframe=true');
return false;
}
});
// user inserts file into post. only run custom if user started process using the above process
// window.send_to_editor(html) is how wp would normally handle the received data
window.original_send_to_editor = window.send_to_editor;
window.send_to_editor = function(html){
if (fileInput) {
fileurl = jQuery('img',html).attr('src');
fileInput.val(fileurl);
tb_remove();
} else {
window.original_send_to_editor(html);
}
};
});