Yes, the update to PowerStore 3 will be a clean install, mostly because the database structure has been changed to offer new futures such as subcategories.
In reality, the functionality you are asking for is not a supported feature of PowerStore 2, it will be supported by PowerStore 3.
I am more than will to go the extra mile if you are having trouble implementing a supported feature of the products we offer. What you are asking for, goes beyond the scope of support, you are asking for free custom development.
If you are not happy with the products being listed on side, you can always remove that code so that it only displays the categories.
the code to remove from the intermediate.php is:
<ul >
<?php do { ?>
<?php if ($totalRows_ProductMenu > 0) { // Show if recordset not empty ?>
<li><span><a href="<?php echo($assumedRoot); ?>Products_Detail.php?ProductID=<?php echo $row_ProductMenu['ProductID']; ?>"><?php print $row_ProductMenu['ProductName']; ?></a></span></li>
<?php } // Show if recordset not empty ?>
<?php } while ($row_ProductMenu = mysql_fetch_assoc($ProductMenu)); ?></ul>