Try editing the file located at /includes/modules/category_row.php when done create a folder "CUSTOM" in /includes/modules/ so you have
/includes/modules/CUSTOM
upload to /includes/modules/CUSTOM/category_row.php
Find this section:
while (!$categories->EOF) {
if (!$categories->fields['categories_image']) !$categories->fields['categories_image'] = 'pixel_trans.gif';
$cPath_new = zen_get_path($categories->fields['categories_id']);
Edit/delete red highlight so that you end up with:
while (!$categories->EOF) {
if (!$categories->fields['categories_image']);
$cPath_new = zen_get_path($categories->fields['categories_id']);
Now because you are overriding the core file this one will be used and you can check to see if it worked or breaks something and if so, just delete it and the default file will be used