I was trying to make such a UI, and the first version is a standard html#select, where as the second one shown here is a html#div with proper css formatting and each set of sub levels are nested html#ul/html#li tags; The one here was initialized with the category path Musical Instruments » Electronic » Drum Machines » Roland, such that this same component can be used where editing is also needed.
Download listcheck.zip, sorry I did not provide the required prototype.js, it would be better for you to get it from the prototype.js website. Also I am not in a position to give out the category db used in the example here. It was simply created as a php array; we had catId,parentId,catText in our category table, and I took it out to a file using the query select concat('$cats[',parentID,'][',catId,'] = \'',catText,'\';') into outfile 'catlist.php' from category;, this was run in a mysql console and the php opening tag <?php was prepended to the file manually. You should be able to modify the sel.php, or even write your own rpc service, to provide the json objects directly from the DB instead of using a php array. If this sounds too complicated for you, please refer the footer of this page.