While there is probably a better way to do this, here's my first shot at adding custom taxonomies to the menu. Assuming that you have a custom taxonomy created, say 'wps_projects'. What are your thoughts?

[php]
add_action( 'init' , 'wps_add_custom_tax_menu_item' , 15 );
/**
* Adds terms to a specific part of the menu by location
*
*/
function wps_add_custom_tax_menu_item( ) {
// Edit these three variables
$top_menu_item_name = 'Projects';
$taxonomy = 'wps_projects';
$menu_location = 'primary';

// Get menu by location
$menu = wp_get_nav_menus( array( 'location' => $menu_location ) );
$menu_id = $menu[0]->term_id;

// Get terms from wps_projects
$term_args = array(
'hide_empty' => false,
'parent' => 0,
);

// Get only top level $terms
$terms = get_terms( $taxonomy , $term_args );

// Get items
$items = wp_get_nav_menu_items( $menu_id, array( 'post_status' => 'publish,draft' ) );

// Set parent item id
$default_parent_id = $parent_id = wps_get_nav_menu_item_id( $top_menu_item_name , $items );

// Filter items to only the part of the menu necessary
$items = get_nav_menu_item_children( $parent_id , $items );

// Cycle through top-level terms
foreach ( $terms as $term ) {

if ( !$term->term_id || $term->term_id == 0 )
continue;

// Check for term in menu
$match = wps_check_nav_menu_items( $term , $items );

// If not found, add
if ( $match == false ) {
wps_create_nav_menu_item( $menu_id , $term , $taxonomy , $default_parent_id );
}

// Get term's children
$term_args = array(
'hide_empty' => false,
'child_of' => $term->term_id,
);

$child_terms = get_terms( $taxonomy , $term_args );

// Set new parent item id
$parent_id = wps_get_nav_menu_item_id( $term->name , $items );
if ( ! $parent_id )
$parent_id = $default_parent_id;

if ( $child_terms ) {
// Cycle through children
foreach ( $child_terms as $child_term ) {
if ( !$child_term->term_id || $child_term->term_id == 0 )
continue;
$match = wps_check_nav_menu_items( $child_term , $items );

if ( $match == false ) {
wps_create_nav_menu_item( $menu_id , $child_term , $taxonomy , $parent_id );
}
}
}
}
}

/**
* Returns true/false whether an item is already in the items (via its items)
*
* @param object the parent nav_menu_item ID
* @param object nav_menu_items
* @return boolean returns true/false
*/
function wps_check_nav_menu_items( $term , $items ) {
$match = false;
foreach ( $items as $item ) {
if ( $term->term_id == $item->object_id ) {
$match = true;
break;
}
}
return $match;
}

// Creates a nav_menu_item
/**
* Returns true/false whether an item is already in the items (via its items)
*
* @uses wp_update_nav_menu_item
* @param object the parent nav_menu_item ID
* @param object nav_menu_items
* @return boolean returns true/false
*/
function wps_create_nav_menu_item( $menu_id , $term , $taxonomy , $parent_id , $args = array() ) {
// Setup Menu Item Args
$args = array(
'menu-item-object-id' => $term->term_id,
'menu-item-object' => $taxonomy,
'menu-item-type' => 'taxonomy',
'menu-item-status' => 'publish',
'menu-item-parent-id' => $parent_id,
'menu-item-attr-title' => $term->name,
'menu-item-description' => $term->description,
'menu-item-title' => $term->name,
'menu-item-target' => '',
'menu-item-classes' => 'termid-'.$term->term_id.' parentid-'.$parent_id,
'menu-item-xfn' => '',
);
return wp_update_nav_menu_item( $menu_id, 0, $args );
}

/**
* Returns the nav_menu_item ID of an item that has the term name
*
* @param object the parent nav_menu_item ID
* @param object nav_menu_items
* @return boolean returns true/false
*/
function wps_get_nav_menu_item_id( $term , $nav_menu_items ) {
foreach ( $nav_menu_items as $nav_menu_item ) {
if ( $term == $nav_menu_item->post_excerpt || $term == $nav_menu_item->post_title ) {
return $nav_menu_item->ID;
}
}
return false;
}

/**
* Returns all child nav_menu_items under a specific parent
*
* @param int the parent nav_menu_item ID
* @param array nav_menu_items
* @return array returns filtered array of nav_menu_items
*/
function get_nav_menu_item_children( $parent_id, $nav_menu_items ) {
$nav_menu_item_list = array();
foreach ( (array) $nav_menu_items as $nav_menu_item ) {
if ( $nav_menu_item->menu_item_parent == $parent_id ) {
$nav_menu_item_list[] = $nav_menu_item;
if ( $children = get_nav_menu_item_children( $nav_menu_item->ID, $nav_menu_items ) )
$nav_menu_item_list = array_merge( $nav_menu_item_list, $children );
}
}
return $nav_menu_item_list;
}
[/php]

For use of get_nav_menu_item_children() see previous post: .

***UPDATED (12/6/2011): I have just updated this function to allow for basic depth (all or none).

Recently, I needed to get all the children (along with the parent) of a particular nav menu item. Since pages can do this very well, I looked into the function get_page_children(). So I modified that function to create get_nav_menu_item_children(). I have recommended this to WordPress core (ticket). What are your thoughts?

[php]
/**
* Returns all child nav_menu_items under a specific parent
*
* @param int the parent nav_menu_item ID
* @param array nav_menu_items
* @param bool gives all children or direct children only
* @return array returns filtered array of nav_menu_items
*/
function get_nav_menu_item_children( $parent_id, $nav_menu_items, $depth = true ) {
$nav_menu_item_list = array();
foreach ( (array) $nav_menu_items as $nav_menu_item ) {
if ( $nav_menu_item->menu_item_parent == $parent_id ) {
$nav_menu_item_list[] = $nav_menu_item;
if ( $depth ) {
if ( $children = get_nav_menu_item_children( $nav_menu_item->ID, $nav_menu_items ) )
$nav_menu_item_list = array_merge( $nav_menu_item_list, $children );
}
}
}
return $nav_menu_item_list;
}
[/php]

I found this great code snippet by Alex Leonard.

[php]
<?php

/**
* Conditional function to check if post belongs to term in a custom taxonomy.
*
* @param tax string taxonomy to which the term belons
* @param term int|string|array attributes of shortcode
* @param _post int post id to be checked
* @return BOOL True if term is matched, false otherwise
*/
function wps_in_taxonomy($tax, $term, $_post = NULL) {

// if neither tax nor term are specified, return false
if ( !$tax || !$term ) { return FALSE; }

// if post parameter is given, get it, otherwise use $GLOBALS to get post
if ( $_post ) {
$_post = get_post( $_post );
} else {
$_post =& $GLOBALS['post'];
}

// if no post return false
if ( !$_post ) { return FALSE; }

// check whether post matches term belongin to tax
$return = is_object_in_term( $_post->ID, $tax, $term );

// if error returned, then return false
if ( is_wp_error( $return ) ) { return FALSE; }

return $return;
}
[/php]

You can add categories to pages, which is fairly simple. To do this, simply add the following to the end of your functions.php file:

[php]
add_action( 'init' , 'wps_add_cats_to_page' );
function wps_add_cats_to_page() {
register_taxonomy_for_object_type('post_tag', 'page');
register_taxonomy_for_object_type('category', 'page');
}
[/php]