I've only just realised that I was using the older MW 2.0.5 so I updated to 2.0.6
This seems to have cleared the two problems highlighted earlier, in fact the update mentions the resolution of the incorrect placement of mysql_free_result.
However it seems to have introduced a different problem which can be seen in the attached screenshot whereby the second menu level for the productsubcatergory is shown in a very small font. Its barely visible but if I click inside the arera of the small font it will bring up the subcategory menu selection.
I have also attached the menu.php and menu.css in the hope that this might be a quick fix to save your precious time without needing a support ticket.