taxonomy_context.module is a great way of building a context-sensitive navigation block. However, most of the time, I don't want the individual nodes to be listed - just the categories.

i.e.

Category
- Term

Not

Category
- Term
-Node 1
-Node 2
etc.

So just find:

$output .= "<ul>" . taxonomy_context_show_nodes($c) . "</ul>\n";

And comment it out. I found it on line 407, and also commented out 415 and 416. Worked like a charm!