Hi, stiksandstones. Yep, you should add the categories. With the ecommerce sites I work on, we always promote brand name and category, and then cross promote them together. It's the best way to cover all your bases. Something like this...
Brand Name Widgets Bob Nancy Lucy
Category Blue Widgets Red Widgets Green Widgets
Category & Brand Name Bob Blue Widgets Bob Red Widgets Bob Green Widgets Nancy Blue Widgets Nancy Red Widgets Nancy Green Widgets Etc.
Usually you can only target as many keywords as you can fit into your page title and that is usually only 2 to 3 keyword phrases and sometimes you want variations of the words.
Re what words to target-- don't forget problems people might be having that will draw them to your site. They may not be searching directly for what you offer but it will fill their need. You have to focus on their need.
Try and avoid using your top keywords in your keyword meta tag. Picture this, you spend 6 hours researching the best keywords, and your competitor comes along and views your source. You just saved them 6 hours worth of work.