You can turn off the subcategory feature by setting the tweak
Code:
categories_collapse_more_than = 0
You can display the authors in the tags browser in author_sort order using the tweak
Code:
categories_use_field_for_author_name = 'author_sort'
The separation (sub-categorization) is done using author sort, and I agree that the displayed letter should also be from the author sort. I use LN, FN author name order and didn't see the problem as I built this feature. I will change it.
If you wish, you can switch to the 'partition' mode and get names that make more sense. Use the tweaks
Code:
categories_collapse_model = 'partition'
categories_collapsed_name_template = '{first.sort:shorten(4,'',0)} - {last.sort:shorten(4,'',0)}'