Oh, this is the best yet, category fans.... (or at least it appears to be, to my non-script readin' tech-bodging eyes....) If I understand correctly, M. at Pappmaskin has written a script that executes a full-text search of your blog for in-post keywords, and displays the results (gasp) in your blog, and on your template. This seems spiffy!!
You have to hand-code search terms into your sidebar, & because this category method is a search, you don't get the traffic benefits of tagging, but for those of you who have been "on my case" for steering my traffic the way of del.icio.us, or who feel that the method I'm using is clunky, this may be for you.
I can't claim to grok it 100%, so if you do, hit the comments & set me straight!!
Update 1/14/06: For a clear & concise how-to for this method, see Young Ladies Christian Fellowship. Thanks, Gretchen.
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http://pappmaskin.blogspot.com/2005/10/blogger-categories.html?tag=flash
or so
http://pappmaskin.blogspot.com/2005/10/blogger-categories.html?tag=greasemonkey
It is, as you say, full text search passed throght feed2js which again does a search on the blogger search engine, but all this can be switched around as new searchservices get introduced. It was actually on of the blogger-hacks I found on your blog that made me make it (besides really, really wanting something resembling categories on blogger), but it would take me weeks to re-tag all my older posts for technorati/blogger.
In a few months some of my "categories" could be relinked, to point to a technorati search, but I simply don't have the patience to post all my posts to del.icio.us, hence the freetext search. And I suppose that in a little while to google/blogger search will rank tagged posts a little higher than untagged posts. Who knows. I buildt my stuff so it will be easy to remake, I only have to rewrite my externally hosted js, I don't have to touch the blogger posts at all, or the links.