You are using BetterCategories which may not be compatible with expanded categories mods. You might be able to use fragfutter's Uncollapsed Categories Tree with it (search in the forum), as that only feeds the standard tpl_categories.php so does not disrupt mods to it.

Failing that, Categories Dressing is fully compatible with Uncollapsed Categories Tree (UCT comes bundled as an option with the latest version of Cat Dressing).