My personal opinion here is that user experience is priority #1. Google wants sites to be user friendly before it wants you to optimize it, so that said - I would recommend that you maintain the category navigation in the menu. If you look at various ecommerce websites across the internet, Amazon.com - is one of many, many sites that do the same navigation style as yourself. I think that you're just fine and to continue. It's a great looking website.
Although, looking further, I wonder why your navigation style is like this? http://www.towelsrus.co.uk/bathrobes/catlist_fnct362.htm
Is it just an unchangeable facet of your Ecommerce platform? http://www.towelsrus.co.uk/bathrobes/ or http://www.towelsrus.co.uk/cat362/bathrobes/ or http://www.towelsrus.co.uk/362/bathrobes/ would be a little cleaner. Anyway - my personal opinion. Hope this helps.
Best,
Lucas
PS. Matt has a good blog post for you: http://www.mattcutts.com/blog/how-many-links-per-page/