Is there any way to automatically create a category and user group based upon the users name?

You would have to modify the registration process to do this for new users.  It would require both php and sql expertise to accomplish this.

thanks for the reply....

Is this something you could do or do you know someone?

I would look at Community Builder.  I don't use it, but I think they have an sql addon that may do what you want.  I don't think it was released when I saw it, but was part of their development stuff.  Sorry I can't remember more, it's been a while, but maybe you can find something.  You'll still have to understand the K2 database layout and some basic sql.

Ok, thanks for your time.