Last modified: 2008-07-02 08:27:49 UTC
The "no pages or subcategories" message is not shown when CategoryTree is used on an empty category with hideroot="on" or depth="1", that is, if the empty level is initially loaded. This happens on wikipedia, so check with $wgCategoryTreeDynamicTag = true;
Note: I don't have time to look into this right now, so if someone else could fix it, that would be great. Otherwise, I'll do it mayself at some point - if I don't forget.
Fixed as of r36886.