I discovered the same issue while trying to identify the best way to categorize or tag the posts.
Here's the problem as I see it:
There are limitations on the number of tags you can show on your widget, but it is very easy to tag when you're creating a blog post. You can just type few words and type-ahead characters show up.
There are no restrictions on the number of categories to show in the widget, but it is not easy to select the previously made categories (if you have a lot). The category box where you check the categories is way too small and it is at the bottom.
I think the scheme should be flipped. Or, the limitation from the tags (in widget) should be removed. If there are more tags (sub keywords of the main category) then the limitation should technically be on the category and not tags.
What others think here?