Two questions re: categories and sidebar widget

I am a WP newbie, so I apologize for the learning curve. I hired a tech-savvy contact to install WordPress on my ISP server last week, loosely using the MistyLook theme to craft a look/feel I’d created. My site can be viewed at shallowfish.com. I have two questions:

1) I can’t delete or edit the default “Categories” or “Uncategorized” entries in the side bar. Naturally, I want to customize each category heading with my own subjects (I’ve already added and edited a few), but I can’t seem to manipulate these specific headings. Any suggestions?

2) I’d like to add the Sidebar widget to facilitate content management, but when I downloaded the code and pasted it within “Sidebar.php” under “Theme Editor”, it screwed up the page design (bottom of site got all funky). In addition, I did not see a “Sidebar Widgets” button appear after adding the new code. I may be going about adding the code all wrong – party due to the fact that most of the support info I can find on WP is sketchy on details.

Anyone care to give me the actual steps required to 1) delete unnecessary categories and 2) add widgets to an ISP-based WP blog?

Thanks in advance for any assistance.

John