Say I have a Main Category called Boots with a subcategory called Boots with Fur. When I selected the categories in the product, should I just select the subcategory Boots with Fur or should I select both Boots with Fur AND Boots?
For displaying products in parent categories without addition products to it, you can use setting "Is anchor" in parent categories. You need to enable attribute "Is anchor" for parent category using category edit form and run reindex. After that products from child categories will be showed in parent category.