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Sorry pablo103, the SEO feature was not functioning on the original Catads module either and I have been unable to get it to work up to date.
If you match the folder names in seo_url.php and the .htaccess file, then copy the .htaccess to the Xoops root directory the category paths work, but any other links and navigation just generates 404s.
I only left the option in the prefs in the BETAs in case someone could send me a fix. I will probably remove it from the final version otherwise it will just annoy people.
I am uploading an RC soon which fixes category permissions and a few other issues, so keep an eye on the project page.
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