I've been able to find a tiny bit of infomation that tells me that this fiesta is Dec. 31 and Jan.1. I'm contemplating spending the night of Dec. 31 in Catarina so I can see this. Can anyone tell me more about what I could anticipate if I decide to do this? Thank you.
You might also try emailing the hotel Casa Catarina for more info. They should be able to give you details.

Thanks for the idea. Unfortunately, I tried e-mailing them over a week ago asking to reserve a room, and I haven't heard back. Frankly, when trying to put this trip together I am becoming increasingly frustrated with e-mail as a means of communication. I'd say 2/3 to 3/4 of my e-mails go unanswered, and I am trying more upscape places and agencies.
I understand your frustration, so here's another idea. Hotel Ivana's in Masaya was very good about replying to all my questions in English and promptly (usually within a day). I am sure they'd know what's going on in Caterina since it's so close. Their email is hotelivanias@hotmail.com

Don't expect anyone in this country to reply to your mails, or even call you back if you leave a message. It's just something people don't do around here. But sometimes people do pleasantly surprise me call back - which instantly means that they'll get my business, whether they are the best choice or not, simply for not ignoring me.
Anyway, have you read this? (not a lot, but maybe it helps):
http://www.vianica.com/headline/105
I've never been to the Fiesta de Catarina, but I may go have a look this year.