How do you guys decide on what categories to use for your links directory? I think that categories naming is important cos we should not change it often. When we change the categories, the backlinking url given ot our partners will be broken and they may drop our links. I am planning to use Reciporcal Manager. Also, is it true that we should not name our directory as "links"?
Yes, look at good directories like dir.yahoo.com and dmoz.com and uncoverthenet.com and botw.org and see what they are doing.
I've never heard such a thing, but you may just want to develop a search directory instead of link directory. As you add links, you'll develop a nice search directory over time. Also the most ideal naming is probably, directory.yourDomain.com.
Search engines consider directory.yourDomain.com as a different site compared to your main site yourDomain.com If you main site has high PR, it's your main site that webmasters want to exchange links with. Unless your subdomain has equally high PR.