How to Get Categories to Show Under Posts

[mutablemuse]

Hello,

I just purchased the Lifestyle theme and would like to have the featured post showing with three previous posts and then two categories themes underneath, but seem to be unable to create that using the widgets.

The main reason I purchased the theme was to be able to show the featured page with a large photo, the following posts with smaller photos, and the two category lists below that with photos--just like the page shown/advertised for the theme.

Can you help me create this easily? Is there something I am not doing correctly on the theme options page?

Here's a link to my blog.

Thank you.