Yes, there are no "Categories" in AddressBook, it uses the groups instead like the other iApps. The bummer for me was that would have been nice to automatically create the "groups" based on my categories. I had to manually reset each of the addresses to after creating the groups -- gave me a chance to clean out some old address.
The big thing lacking in Address book is any way to determine which entries are not assigned to any group (i.e. the "Not Assigned" feature of Palm Desktop). These are inconviences, but they are outwayed for the ability to have a system-wide address book that integrates with my other apps.
As for getting back to Palm Desktop, yes you can do that. Goto /Library/Application Support/Palm Hotsync. The folder "Conduits" contain your currently active conduits. The "Disabled Conduits" contain all other ones. Move the "Apple" one in "Conduits" over to "Disabled Conduits". The move your Address, Datebook, ToDo and Memo into the "Conduits" folder.
Next, open up the Palm Hotsync Manager. Goto the HotSync menu and select "Conduit Settings..." . Confirm the settings are as you expected. To be safe, you may want to force a one-way sync from Palm Desktop back to your device.
That should do it for you.