Line breaks in categories box

If you go into a subcategory, it is slightly tabbed to the right. Another subcategory, and it tabs it some more. If you get to a point where the category name is too long to fit in the box width, it puts a line break and wraps. But that next line starts way off to the left, aligned with the topmost category. How do I make it align with it's own subcategory? Thanks.

Rebuild the categories class so that it uses nested lists.

I don't know how else to say this, but I have no idea what that means. I made it to /includes/classes/category_tree.php. But I don't know what you mean by making them nested. I thought it would just be a matter of a <br> somewhere or something simple like that. Is it a complicated modification? Also, can the override system be used for this file? Thanks.