I may be missing something, but it isn't working for me.
I created 3 products, TestProduct 1, TestProduct 2, and TestProduct 3. I put them in 3 sub-categories, SubLevel 1, SubLevel 2 and SubLevel 3. Those categories, and the products, are all in a "Master" category of Test TopLevel.
Category Quantity Discounts are set up in Test TopLevel category, but are not being applied to the products.