I've created a simple classified ads module for Drupal 4.7 and Drupal 5. It is now in use on a large number of Drupal-based sites.
My classified module creates a new node type ('ed_classified') and associates an expiration time stamp with all nodes of that type. Borrowing from the image.module image gallery scheme, it creates and associates a custom taxonomy with the classified ads. Site administrators then need to create child taxonomy terms for each classified ad category. As with any Drupal taxonomy, ad categories may be nested to arbitrary depth.