Categories have been around since the dawn of Outlook (97). They actually
worked, too, except in Outlook 98\IMO. But then nothing worked in Outlook
98\IMO, even though Microsoft never admitted it.
Unfortunately, Categories are an imperfect substitute for DL's. Most users
create their categories using criteria other than emailing as their prime
concern. Accordingly, members of a category often contain no email address
or multiple email addresses. Both of these conditions can create problems
when the user tries to select the Category and use the "Actions > Create
email to Contact" option.
I would consider it a fair statement to say that Outlook has never properly
addressed the need for end users to group multiple recipients when using
Internet Email protocols. Outlook is a great client for Exchange (damn well
better be), but it is sadly lacking as an email client for the standalone
end user.
Will Outlook 2010 be better? I can hope, but I've been disappointed every
time so far.