What you describe should work. Some detail somewhere's not right and it's keeping a record in LineItems from matching to a group of records in Products_Bycategory. Check each detail of your relationship definitions carefully--making sure that each pair of match fields are the same data type. Inspect your data and make sure that they really have matching data like you would expect. Confirm that the values in your list are drawn from products_bycategory and not products.
You can also simplify your relationships:
LineItems.CategoryID = Products_byCategory::CategoryID
will work for you and simplifies your relationship graph by eliminating the need for one TO here.
If all else fails, you can upload a copy of your file to a share site and post the link here so that someone can download it and look at it.