Oh, did your banana have "CAT III Max 600V" stencilled on it? The $15 multimeter does. I suspect the cheap meter has about the same right to wear that label as the banana.
The problem with meeting CAT ratings is transient voltage spikes- I don't recall exact numbers, but some for some of the higher CAT ratings multimeters are required to withstand (meaning continue to operate, or fail in a safe way, with no harm to operator) several kilo-volts.
Cheaper multimeters just literally blow up: http://www.youtube.com/watch?v=M-FZP1U2dkM
Not that I'd like the CPSC anywhere near electronics, either. But given the amount of QA those meters probably (don't) receive and their intended market, Sparkfun should be responsible and either post their ongoing testing process, or probably just drop the rated voltage to 100V.