I'm not following exactly. Are you trying to
1. get rid of the "/category/" component of the URL when you are viewing category pages? That isn't an "extra category" it is just a path that keeps things from getting confused. If everything is a subcat of destinations, though, you could change it from "category" to "destinations" on your permalink admin page. Generally speaking, though, if you want category archives, you would not want to get rid of some "category" equivalent (see also this discussion [webmasterworld.com]).
2. or in your information schema, trying to get rid of "destinations" as a way of categorizing posts?
Or both of those things?
One more question - are there categories under "destinations" as in
Normally, when you get rid of a category, all posts that are in that category go back to being Uncategorized. I'm not sure what happens if you have subcatories and you get rid of a category above them in the hierarchy. I would guess they become subcats of Uncategorized. I'd have to test it though.