Well... If there are subcategorys, then these are in different color and this is the same as background. So there is nothing visible. Also these aren't active. So if You click on these empty (actually they're not empty, address is visible on web browser, I use FF and this is visible bottom left corner) then nothing happens. Is this how it must be ?
About menu depth. You can set this and it works, but result is total mess. Menu will be show all subcategorys too, but they are overlapping each other.