Looks like that did it! Made the following modification to the UpdateDropdown in Categories.aspx.
vb:
Private Sub UpdateDropDown(ByVal listNumber As Integer)
Select Case listNumber
Case 1
lstCategoryLevel1.DataBind()
lstCategoryLevel1.ClearSelection()
lstCategoryLevel1.Items.FindByText(txtLevel1.Text) .Selected = True
txtLevel1.Text = ""
Case 2
lstCategoryLevel2.DataBind()
lstCategoryLevel2.ClearSelection()
lstCategoryLevel2.Items.FindByText(txtLevel2.Text) .Selected = True
txtLevel2.Text = ""
Case 3
lstCategoryLevel3.DataBind()
lstCategoryLevel3.ClearSelection()
lstCategoryLevel3.Items.FindByText(txtLevel3.Text) .Selected = True
txtLevel3.Text = ""
End Select
End Sub