What you can do is add a DOM for the category itself or make a checkbox list to show in the popup. As far as I know the DOM can't show several levels in a hierarchy in a meaningful way, it will just show you a flat list of categories.

What you can do though is affect how the DOM writes the category names by making your own function for it and putting that in the field list. Then you could do something like what WordPress does where a sub category gets a - before the name and a sub sub category gets -- etc. After that you'd want to do some kind of custom sorting to get them to list in a good way I guess.

As far as I know there's no native way of dealing with it if we by native mean plug and play. Getting it to show the nesting isn't hard though and the function you'd have to write for it wouldn't have to be many lines. You do have two special select lists that show hierarchical content, the one built in that's used in the access tab and UncleCheese has one called SimpleTreeDropdownField that does pretty much the same thing.

Uncle Cheese has made a couple of new ones recently and maybe one of them could help you out, I don't know. Anyways, don't be afraid to get your hands dirty with some code.