Yeah, you should be able to just go ahead and add in the lastn="n" attribute to that MTEntries tag in there, like:
CODE
<!-- cat -->
<div class="sidetitle">
Catagories:
</div>
<div class="side">
<MTCategories>
<a href="<$MTCategoryArchiveLink$>"><$MTCategoryLabel$></a><br>
<MTEntries lastn="5">
<$MTEntryTitle$>
</MTEntries>
<br /><br />
</MTCategories>
</div>