Since there are a lot of pun-based categories on Jeopardy, I can understand why they would have problems with it.
edit: furthermore, sometimes it's impossible to narrow down the answer if you don't understand the category. For example, if the category is '"C" you later' or something, there might be like 8 possible synonyms that fit, but only one starts with a "C".
After typing out this comment it occurs to me that if you carefully consider each answer there is only only logical question for all the answers in this category. Although I don't have any specific examples, there are times when a question is ruled incorrect because of the category name (e.g The category called for a specific number of letters in the response).
Either they ended up not implementing this, or Watson didn't hear him correctly :)