I tried playing with it. This is the HTML section:
<panel1>
    <myCatHolder />
    Continue button
</panel1>

<panel2>
    <myCatHolder2 />
    Previous + Continue button
</panel2>

<panel3>
    hand built form
    Previous + Submit button
</panel3>

On the first continue button I added:
Session("myDrpDwnCat") = drpDwnCategory.SelectedItem

When the first continue button is clicked it gives the same error:
Object reference not set to an instance of an object.

I created a simple page this morning to see if I would get the same error message and I did. Here is the code:

Private Sub Page_Load(ByVal sender As System.Object, ByVal e As System.EventArgs) Handles MyBase.Load
        Dim myDrpDwn As New DropDownList
        myDrpDwn.ID = "categoryddl"
        myDrpDwn.Items.Add("Selection 1")
        myDrpDwn.Items.Add("Selection 2")
        myDrpDwn.Items.Add("Selection 3")
        PlaceHolder1.Controls.Add(myDrpDwn)
End Sub

Private Sub Button1_Click(ByVal sender As System.Object, ByVal e As System.EventArgs) Handles Button1.Click
        Label1.Text = categoryddl.SelectedValue
End Sub

It loads fine but when the Submit button is clicked it again displays:
Object reference not set to an instance of an object.

For anybody following this post you must add this to the Button_Click Sub

Dim ddl As DropDownList = PlaceHolder1.FindControl("categoryddl")
Label1.Text = ddl.SelectedValue

It now works.

actually I have just started using asp.net and have been having this same error since long.. can u teell where have you declared this PlaceHolder1 in the html part and what is it exactly

The placeholder is on the web page.

PlaceHolder is a control use to reserve space for controls added by code.

Can you give more specifics about your problem?