How do I make a division in the Categories box for differrent kinds of items? Or make a second box? Right now it's all watches, but I'd also like to have something for "Other Items." Again, either a second box or a division of space after the watches with a header/title in the same font and color as Watches, Information, etc.

Just like with the watches, the new categories of items should automatically be placed there when I create them in Catalog-Products-Create.
This is not a template specific question so I would recommend asking this one on another forum. If it were me, I would use the default zen cart functionality. I would return the "watches" header to "categories" and then create categories and sub categories within the categories box. There are a few modules that will allow you to always show the sub categories in the category box. You can do a search on the forum for the threads relating to them.