Hi Jaza,
Since this issue, http://drupal.org/node/68586, I went ahead and explored further about using the category module for developing handbooks.
I found that the only way to let users create handbook types pages is to give permissions to them for 'create categories' and 'edit own categories'. This is good enough, especially with the revisions features for logging changes.
However, it also opens up the site in such a way that anyone with 'create categories' permission can potentially rearrange the category hierarchies in the site, whether accidentally or deliberately. The latter may not happen within a smaller, trusted community or group, but the risk of the site structure being messed up is so great that it makes it pretty much imprudent to use the module to develop a collaborative handbook in which the entire community participates.
I think taxonomy(category) based access control might be the answer here. I know you have offered to do this sometime in the future, but I just wanted to record how crucial this work is to realise the full potential of category module as a replacement for core taxonomy and book modules. But, one question that nags me is whether category module should depend on a helper or contrib module to offer the complete feature set of taxonomy + books combined...
I don't know if I am missing something here or you have better ideas about this situation. In that case, feel free to move priority to normal:-)