I know a lot of you are having problems with Atahualpa 3.4.9. Just want you to know it's working fine for me on a test site which has the latest Wordpress version on it. It was working fine also when I was running WP 2.9.2 on that site: http://fastwomen.com.
Notice the nav menu in the sidebar, which is "mixed." You can have categories, pages and outside links in it.
One thing to remember when using ATA 3.4.9: after I installed it, I did the import of the ata-round.txt file from the styles folder. Doing this shouldn't be necessary to get the site to show up, but try it if you're having problems.