I haven't been able to reproduce that. On my 1.3.0.1 test site (and also a live client site) the category name wraps around as you want. The closest that I can gte is a very long category name with no spaces which breaks out of the sidebox rather than expanding it.

What version of Zen Cart are your using?

Do you have any add-ins?

Are you able to post a link to this behaviour?

What template are you using?