How do I make the categories box into a list, rather than links with line breaks

Edit the file - yourtemplate / sideboxes / tpl_categoires.php

in such a way that mentions of <a> tags are replaced by <li><a>
and <br> tags are replaced by <\li>

You then need to add
$content .= '<ul>';
before the for loop

and
$content .= '</ul>';
after the loop