Drupal 7: Traversable taxonomy

get_menu.php

<?php
/**
 * Returns the menu items for the specified term and its children (recursively).
 *
 * @param $term
 *  The term instance.
 *
 * @return array
 *  The menu item(s), as a renderable array.
 */
function taxidermy_menu_items($term) {
	
  $uri = entity_uri('taxonomy_term', $term);
  $items = array('data' => l($term->name, $uri['path'], $uri['options']));

  foreach ($term->children as $child) {
    $items['children'][] = taxidermy_menu_items($child);
  }

  return $items;
}

/**
 * Returns the rendered menu structure based on the default vocabulary.
 *
 * @return string
 *  The rendered menu.
 */
function taxidermy_menu() {
	
  $menu = array('#theme' => 'item_list');

  foreach (taxidermy_get_tree(1) as $term) {
    $menu['#items'][] = taxidermy_menu_items($term);
  }

  return render($menu);
}

get_tree.php

<?php
/**
 * Loads the specified terms, adding taxidermy-specific fields.
 *
 * @param array $tids
 *  The taxonomy term IDs.
 *
 * @return array
 *  The array of terms.
 */
function _taxidermy_load_multiple(array $tids) {

 $terms = taxonomy_term_load_multiple($tids);

  foreach ($terms as $term) {
    $term->parent = NULL;
    $term->children = array();
  }

  return $terms;
}

/**
 * Construct an ordered tree of taxonomy terms for the specified vocabulary.
 *
 * @param mixed $vid
 *  The vocabulary ID.
 *
 * @return array
 *   An array of first-level terms, each with their children set.
 */
function taxidermy_get_tree($vid) {

  $tree = array();

  // query for all terms in the vocabulary
  $query = db_select('taxonomy_term_data', 't');
  $query->join('taxonomy_term_hierarchy', 'h', 't.tid = h.tid');
  $query->fields('t', array('tid'));
  $query->fields('h', array('parent'));
  $query->condition('t.vid', $vocabulary->vid);
  $query->orderBy('t.weight');

  // load the terms and prepare them for rendering
  $result = $query->execute()->fetchAllAssoc('tid');

  $terms = _taxidermy_load_multiple(array_keys($result));
  
  // merge child terms to their parents, push top-level terms into the tree
  foreach ($result as $row) {

    $term = $terms[$row->tid];

    if ($row->parent) {
      $parent = $terms[$row->parent];

      $term->parent = $parent;
      $parent->children[] = $term;
    }
    else {
      $tree[] = $term;
    }
  }

  // insert any post-processing you require here, such as resolving term
  // depth, term links, or backing the results into a cache bin

  return $tree;
}