Catagory setup issues.

I am having some issues with ny catagories being recognized when adding assets.

I have created the catagories per the implementation guide, created a catagory set to associate.  I assigned the acatagory set to the Asset group.  When I go into the Asset numbers form to enter data.  I am having issues with the catagory field. 

When I search the field, I see all of my defined catagory combinations.  However, when I coose anything but the default catagory, I am getting an error message that tells me that the catagory is invalid.

At this point, I am pretty sure that I missed a setup somewhere but cannot seem to identify.