I did this:
Enter mysql monitor (backup database first)
Do this for the whole aphabet (one at a time):
UPDATE lsql_Category SET Full_Name = REPLACE(Full_Name,"A","a")
UPDATE lsql_Category SET Full_Name = REPLACE(Full_Name,"B","b")
etc etc

The result is lower case directories and since you are only changing the filed "Full_Name" the <%category%> tag will still output the upper case directory names on the home page and category pages.

I am sure there is an easier way to do this, but I am a novice. Bottom line is that it works.

Mike