WordPress MU

My category page returns, "Nothing found for..." error.

My permalink structure is:
mydomain.com/archives/%post_id%

but when I try to access category page at:
mydomain.com/archives/category/cat1

it returns the above error.

It's supposed to list all the posts within the specified category, but my wpmu 2.6.1 is not doing that.

What do you think could be the reason behind?

I first thought archives.php is broken somehow, but monthly archives pages are working and others are just fine. But only category pages returns the error.