We have a requirement to remove the category paths from URLs with a site we are converting to Magento. We want the category URLS to be www.store.com/catpage.html instead of www.store.com/cat1/cat2/catpage.html. I found how to easily do this for product pages but not for categories themselves.
You cannot do this with Magento Admin config. You must build some new things. I think it doesn't make a sense and isn't easy, there are some points you should consider:
+Create new Router to match identifiers from categories.(You can see CMS Router: app/core/core/Mage/Cms/Controller/Router.php)
+How breadcrumbs show?
+May create new tables, you should take a look core_url_rewrite table.
I already found that you can't do it in the admin and it makes sense when you are converting a site to magento and want to preserve the existing category urls as they are if they are already flattened.
I ended up using Activo's "Category URL SEO FREE" and so far its working just as expected. This should be a baseline feature. It already exists for products. Just not Categories. Seems like it was something that was overlooked.