This is an enhanced version of the Categories2Menu Plugin.
This actually creates a Categories link on the menu and a drop-down with all categories when you hover over it.
Added more style options.
Install then enable the plugin in the dashboard. Please know that this plugin only works on themes that are php based not tpl , does not work on mobile or embed friendly themes that use default.master.tpl
Tested on Vanilla 220.127.116.11 and lower and 2.1, 2.2, 2.3