I can’t speak to the category watching question as I haven’t used it, but one thing to note is that Discourse tries to be intelligent about only sending email to users when they’re not currently active on the platform. If Discourse registers them as being currently online I believe the default is to only send an internal notification i.e. they’ll see the little notification dot in the upper right, but would only get an email for the notification if they’re not active on the platform. Basically trying to not send redundant notifications. So if you were doing these tests w/ the test user account online that may be why the email wasn’t sent. (If not, then must be a different explanation!)
I haven’t used mailing list mode either but my impression is that’d be the most extreme option on the send users email for everything end of the spectrum.