Where did you get this version of chcategories? Neither the original nor the one packaged with Categories Dressing has a <dl>. We would need to see the PHP files for the mod to know how it is coded and how to fix it.

You have a <ul> inside the <dd>, but only <a> links in the <ul>, with no <li> tags at all. Whoever coded this was trying to be up to date but didn't really know what they were doing.