User-selectable categories like My Yahoo!

you mean like:

<?php wp_list_cats(); ?>?

That lists them, and users can click on them to see all posts in those categories

No, Say you have a list of categories…..

cat1
cat2
cat3
cat4
cat5

displayed on the home page, Though the end-user only wants to display cat1, cat3 and cat5 on the home page. Is it possible to do that?

I’m also looking for something like this. I posted a suggestion in https://www.ads-software.com/support/topic.php?id=5328 but unfortunately I don’t know how to code said solution.