Several users over the Internet have reported that the latest version of WordPress 2.8 was released with some bugs. And it siginificantly messed up the themes and plugins since some of them were not compatiable, the most common problem was messy categories.
If you wish to downgrade from 2.8 version to previous 2.7.1. Here you can find the basic tutorial. However i want to remind the users, that the process is not easy and require higher technical knowledge of WordPress and Database management. If you have just got into Blogging, then i would strongly recommend to consult someone or pay someone to take these steps on your behalf, else you might end up loosing your Blog or get things messed up even worse.