structuring a hikashop site correctly

Is having a separate module for each product category or sub-category a generally good practice or not?

It depends. What do you want to do ?

What I want to do is simple - a user clicks on a menu item in the sidebar and then the product listing appears in the main area.
It seems that I can either do this by creating a menu item of type hikashop » hikashop_product_VIEW_DEFAULT_TITLE or I can create a module for each category and sub-category and in the module manager set them to display on the relevant menu items.
I'm not sure which method is better or if it makes a difference

It's better to have your products listing displayed in the main content area.
You can create one menu item of the type hikashop product listing for each category. Or you can have a module which displays a listing of categories which then brings up the products listing on the main content area.
That second option could be more difficult to setup and/or less customizable but then you don't need to add/remove menus when you want to add/remove categories in the future. If you think that you won't have to manage a lot your categories, the first option should be simpler.