I have been building a basic blogging system and am implementing Tagging and Categories. ActsAsTaggableOn is by far the most evolved of any of the tag/category gems out there, and Tags are almost like categories.
The only difference between tags and categories, from a consumer/user's perspective, is categories are:
From a programmer's perspective, Category is almost a sub-class of Tag.
Looking at Wordpress' Database Schema, they take this same approach:
They have a Term and TermRelationship, which are basically Tag and Tagging. They just have included a parent property on the Term, so they can use Term for Tags and Categories.
What about including this nesting capability in the gem?
The benefit is: 'we' would never again have to mess with building category models, and the 900+ watchers would immediately have a lot of very useful functionaliy.
-1 Tags should stay as simple as possible; do one thing correctly rather than trying to doing too much and failing.
I don't see any point to include nesting. We are not building second rails. Use awesome_nested_set for nesting and acts-as-taggable-on for find related categories...