http://www.photopostdev.com/photopost/index.php - feel free to signup over there and try out the features.
Your users can create albums and assign them to categories if you allow them to. They can assign a single image to multiple categories without having duplicates stored on the server. There is a Members Gallery the highlights all the users photos and their albums.
I think this covers what you were asking - there is alot of flexibility for the users to manage their own albums and place them within your gallery.