I'm trying to create a categories table seperate from the main content table.

The problem right now is that all the categories are in names in the current table.

So

ID Category Title
1 Categoryname Title1
2 Categoryname Title2
3 Categoryname2 Title3

The category column will be moved to a seperate table:

ID Category_Name
1 Categoryname
2 Categoryname2
etc

However the content table is huge with over 20,000 records so I'm presuming that a while loop through each record would take too long. How'd I go about doing this?

I duplicated your tables with this:

CREATE TABLE category (
  category_id int(10) unsigned NOT NULL auto_increment,
  `name` varchar(25) NOT NULL,
  PRIMARY KEY  (category_id)
) ENGINE=MyISAM  DEFAULT CHARSET=utf8;

INSERT INTO category (category_id, name) VALUES 
(1, 'categoryname'),
(2, 'categoryname2');

CREATE TABLE content (
  content_id int(10) unsigned NOT NULL auto_increment,
  category varchar(25) NOT NULL,
  title varchar(25) NOT NULL,
  PRIMARY KEY  (content_id)
) ENGINE=MyISAM  DEFAULT CHARSET=utf8;

INSERT INTO content (content_id, category, title) VALUES 
(1, 'categoryname', 'title 1'),
(2, 'categoryname2', 'title 2'),
(3, 'categoryname', 'title 3');

I then executed this query:

UPDATE content c1 SET c1.category=(SELECT c2.category_id FROM category c2 WHERE c2.name=c1.category)

And then changed the field type of category:

ALTER  TABLE  `content`  CHANGE  `category`  `category` INT  UNSIGNED NOT  NULL

Now, I didn't watch my field types very closely. My main goal was to demonstrate how, so be sure to make adjustments based on your field types.

With a lot of records, you may want to run the change on an external server and then import all the changes.

Hope that helps!