Is there a server-side email solution that will allow users to subscribe to updates via email and, specifically, also be able to do this by category?
I’m aware of Aweber and Feedburner being able to provide this kind of functionality, but my client has requested this as a server-side solution, with a database on-site.
Try Subscribe2 plugin that provides a comprehensive subscription management and email notification system for WordPress blogs that sends email notifications to a list of subscribers when you publish new content to your blog and each user can select which categories he wants to get notifications from.
I found Mailpress to be a far superior option to the others I tried (Post Notification and Subscribe 2). It has many options, it’s own set of additional plugins, its own themes, and the option to sync subscribers with your userbase.