One last note: besides being correct to use the tree_level function, it is significantly faster, probably an order of magnitude. The db_multirow ended up being:
db_multirow categories blog_categories "
select
c.*,
o.context_id,
lpad('.',(tree_level(o.tree_sortkey) - 4), '.') as indent
from
blog_categories c,
acs_objects o
where
c.category_id = o.object_id
order by
o.tree_sortkey"
