I had the same problem, but can´t remember how I fix it.
My code in dm_categories.php:
// BEGIN Configuration Options
// Set the value below corresponding to the type of menu you want to render
// 0 = Horizontal Drop-down; 1 = Vertical Flyout; 2 = Tree Menu;
// 3 = Plain Horizontal Menu; 4 = Plain Vertical Menu
// Include the appropriate stylesheet in your store stylesheet, and if rendering
// types '0' or '1', you must also echo (output) the "menu footer" variable
// in your store footer as described in the readme (or submenus won't work)
$menu_type = 0;
// Set to false to display the menu output only. Set to true to display in
// a regular box. The former is useful for better integrating the menu with your layout.
$show_dmcats_as_box = false;
// Set to 'true' to assign TITLE tags to each of the menu's items, 'false' to leave blank
$menu_use_titles = false;
// Name of the icon file to be used preceding menu items. Leave blank for no icons.
// NOTE: Does not apply to plain style menus. Icon should be in the /images directory
$menu_icon_file = '';
// Width and height of icons used in menus (does not apply to plain menus).
$menu_icon_width = 11;
$menu_icon_height = 11;
// Set the graphic to be used for the forward arrow and down arrow images used in
// drop-down and fly-out menus. Images must reside in your catalog's /images directory
$menu_fwdarrowimg = '';
$menu_downarrowimg = '/down-arrow.gif';
// Indicates whether or not to render your entire category list or just the root categories
// and the currently selected submenu tree. Rendering the full list is useful for dynamic menu
// generation where you want the user to have instant access to all categories. The other option
// is the default oSC behaviour, when the subcats aren't available until the parent is clicked,
// more suitable for plain-style menus
$show_full_tree = true;
// For tree menus, set to true to have only nodes corresponding to the current category path
// expanded. If set to false, the tree menu will retain expanded/collapse nodes the user has
// selected (as well as expanding any for categories they've entered)
$menu_tree_current_path = false;
// Set the three numerical values below to adjust the offset of submenus in
// horizontal drop-down and vertical fly-out menus. Values adjust the following (in order)
// Top Offset: # of pixels from top border of previous menu the submenu appears
// Right Offset: # of pixels from right border of previous menu the submenu appears
// Left Offset: # of pixels from left border of previous menu the submenu appears
// if the submenu pops to left (i.e. if window border is reached). Negative values are allowed.
$menu_layer_offset = array (0,40,40);
// Show icons on tree menus? If set to false, only expand/collapse icons and connecting lines are shown
$GLOBALS['dm_tree_folder_icons'] = false;
// This is the HTML that you would like to appear before/after your categories menu if *not*
// displaying in a standard "box". This is useful for reconciling tables or clearing
// floats, depending on your layout needs. For example if not including in a box in the
// default osC template, you would need opening/closing <tr><td> tags...
$before_nobox_html = '';
$after_nobox_html = '';
// END Configuration Options
And My css
/* Horizontal Drop-Down Menu Style */
/*-------------------------------------*/
.horbar { /* Color of main horizontal menubar and border */
color: #d5d5d5;
background-color: #000000;
border: 1px solid #000000;
}
.horizitem { /* Behaviour of main horizontal menu items, leave as is for proper operation */
float: left;
white-space: nowrap;
}
.horizitem a { /* Font style, size of submenu items */
font-family: Verdana, Arial, sans-serif;
font-size: 13px;
text-decoration: none;
position: relative;
display: block;
padding:5px 2px;
}
.horizitem a:link, .horizitem a:visited { /* Font style & color of main menu items */
color: #d5d5d5;
text-decoration: none;
}
.horizitem a:hover { /* Font style & color, background menu color of main menu item when hovered over */
color: #00cc00;
background-color: #000000;
text-decoration: none;
}
.horizitem a:active { /* Font style & color, background menu color of main menu item when clicked */
color: #00cc00;
background-color: #000000;
text-decoration: none;
}
.horizsubmenu { /* Behaviour of sub-menu items - leave as is for proper operation of submenus */
position: absolute;
left: 0px;
top: 0px;
visibility: hidden;
}
.horizsubframe { /* Color of submenu item and border */
background-color: blue;
border: 1px solid #000000;
position: relative;
display: block;
}
.horizsubitem { /* Behaviour of sub-menu items - leave as is for proper operation of submenus */
text-align: left;
white-space: nowrap;
}
.horizsubitem a { /* Font style, size of submenu items */
font-family: Verdana, Arial, sans-serif;
font-size: 13px;
text-decoration: none;
position: relative;
display: block;
padding:3px;
}
.horizsubitem a:link, .horizsubitem a:visited { /* Font color, style of submenu items */
color: #d5d5d5;
font-size: 13px;
text-decoration: none;
}
.horizsubitem a:hover { /* Font color, style, background submenu color of submenu item when hovered over */
color: #00cc00;
background-color: #000000;
text-decoration: none;
}
.horizsubitem a:active { /* Font color, style, background submenu color of submenu item when clicked */
color: #00cc00;
background-color: #000000;
text-decoration: none;
}
.horizsubitem .horizfwdarr, .horizitem .horizfwdarr { /* Positioning of right arrow for submenus */
position: absolute;
top: 5px;
right: 8px;
}
.dmselected { /* Style override for selected category tree */
background-color: #000000;
font-weight: normal;
}
.horbar .dmselected { /* Style override for selected root category */
background-color: #000000;
}