Use the cck_taxonomy module

The CCK Taxonomy module provides a cck widget for selecting taxonomy terms and assigning them to a cck field.

findings

1. The field updates appropriately when the term is updated.
2. The field does not provide a taxonomy link (it could be made to do so)
3. The selection list properly displays sub categories - like normal taxonomy item list
4. Searching on the taxonomy field works as expected.

If you set your cck content type in the vocabulary then 2 vocabulary form items will be displayed, 1 by taxonomy and one by cck. Simply assign the vocabulary to a dummy node type to omit this behavior.
Later you can change the dummy node to a category description node, or anything else for that matter to allow taxonomy links in your cck node to provide standard taxonomy behavior (pull up an rss enabled list of content tagged with that term.

Taxonomy categories (vocabularies/terms) are much easier to edit for category list then cck nodes because you can see the full list. The only way to edit categories when using the CCK node reference technique is to goto edit content, filter the content type, make a mental snapshot, goto create content and add the new content (in this case more of a term). This method does have the advantage of providing nodes for each category, but often this is not needed.