The plugin method works great! Thank you @cpradio, and @fefrei for getting me to the correct solution!
This was the end result of what I was trying to do as shown by a screenshot of a category with subcategories in the category list:
I like the look of a stacked subcategory list with the new post indication to the right of each category better than everything pretty much displayed inline.
For future reference, is there an ideal method to use when comparing the plugin vs. the CSS/HTML page implementation, or do they have the same performance and end result?