BUt do u have 32,767 levels?? If that is the case, u cannot use recursive CTE. u need to go for a cursor... or If u can change your design, HeirarchyId in sql2008 might be useful.
But before that first run the below query. I found some problems with your query..
;WITH CategoryRecursive AS ( SELECT CategoryId, ParentCategoryId, 1 as [Level]FROM Category where ParentCategoryId = 0 UNIONALLSELECT C.CategoryId, C.ParentCategoryId ,[Level] + 1FROM Category AS C INNERJOIN CategoryRecursive AS CRON C.ParentCategoryId = CR.CategoryId ) SELECT * FROM CategoryRecursive AS CR2ORDERBY CR2.ParentCategoryId, CR2.CategoryIdoption (maxrecursion 32767)