The following works for me.
In the categories.xml file on your server:
<?xml version="1.0" encoding="UTF-8" standalone="yes"?>
<categories>
<!-- banner_ad: optional element which displays an at the top level category screen -->
<banner_ad sd_img="http://rokudev.roku.com/rokudev/examples/videoplayer/images/missing.png" hd_img="http://rokudev.roku.com/rokudev/examples/videoplayer/images/missing.png"/>
<category title="Audio" description="Test Audio Feed" sd_img="http://rokudev.roku.com/rokudev/examples/videoplayer/images/TED_Design.png" hd_img="http://rokudev.roku.com/rokudev/examples/videoplayer/images/TED_Design.png">
<categoryLeaf title="Audio Feed" description="" feed="http://name_of_my_xml_file.xml"/>
</category>
</categories>
Substitute
http://name_of_my_xml_file.xml with the url of the file on your server containing the following Xml:
<?xml version="1.0" encoding="UTF-8" standalone="yes"?>
<feed>
<!-- resultLength indicates the total number of results for this feed -->
<resultLength>1</resultLength>
<!-- endIndix indicates the number of results for this *paged* section of the feed -->
<endIndex>1</endIndex>
<item sdImg="http://axiomy.com/blood/images/jackbloodSD.jpg" hdImg="http://axiomy.com/blood/images/jackbloodHD.jpg">
<title>The Jack Blood Show - July 3 2012</title>
<contentId>10043</contentId>
<contentType>Talk Radio</contentType>
<contentQuality>SD</contentQuality>
<contentFormat>audio</contentFormat>
<streamFormat>mp3</streamFormat>
<media>
<streamQuality>SD</streamQuality>
<streamBitrate>64</streamBitrate>
<audiostreamurl>http://deadlinelive.info/podpress_trac/feed/20883/0/jb070312.mp3</audiostreamurl>
<streamUrl>http://deadlinelive.info/podpress_trac/feed/20883/0/jb070312.mp3</streamUrl>
</media>
<synopsis>The Jack Blood Show the ins and outs of the phony "Arab Spring" July 3 2012</synopsis>
<genres>talk</genres>
<runtime>7200</runtime>
</item>
</feed>
Try testing it with these files. And make sure that in your categoryFeed.brs file you've set conn.UrlPrefix to point to the directory on your own server containing your xml files.
Also, check the debugger output. With the original Xml you posted there was a debugger message that the Xml failed to parse.