Hey!

I need to setup 4 blog categories like this:
-Blogs
--user1
--user2
--user3
--user4

They will only have frontend access, I want to restrict them to only one category... how do I do that?
I have created a usergroup (Bloggers)

You have to create one usergroup per category and assign each one to the appropriate one.

Hmmm.. so then I can not use the K2 Users module to list all of the bloggers? :P

The module is something completely different than how you will set your users and groups. It has the option of showing all users no matter in which usergroup they are in.