Sorry if I'm not being clear. My wife tells me that I tend to "over" talk a bit
Let me try to summarize:
All I'm looking for is a way for sub-categories to be displayed/organized under a "parent" category in the dropdown list (upload.php). This Parent Category is only a container of sub-categories meaning members can only upload to the sub-categories under this parent category and not to the parent category directly. Members should not have the ability to create sub-categories within this parent category either.