Hmm, I thought there was something a little screwy when I first played with it but couldn't work out what but it seemed to work in the end, well done for spotting it.
Might be worth pointing it out to the guy who wrote it, he may be able to fix it in a new version. Even with that known bug it could still prove a time saver. Easer to click edit then page on main page than manually add pages to an index. If a couple of us did it as a matter of course on every visit we could be sure it was updated until a fix is offered.
I'd say lets go ahead, if visitors can't navigate easily all the effort put into writing pages is rather negated.
Do we want to go for just a few general categories or many, more specific ones? Personally I'd go for a few general because if we ever reach the dizzy situation of many contributors, it will be clearer how a page should be categorised.