Magento – Disable shipping method based on category

I got an answer to this same question on StackOverflow by user Elvarasan. His answer provided me with everything I needed to get this working.

To hide some payment methods based on shipping method you don't need to observe things at all:

Every methods(in one page check out) post the methods which are chosen to the next level. So you can get the shipping method which are chosen, in payment method level. Just print the post things in

app/design/frontend/base/default/template/checkout/onepage/payment/methods.phtml

in this add below one,

<?php print_r($_POST); ?>

So now you can get the shipping methods which are chosen previous step. And note it, so now, you can add just simple logic (if else) condition in same file for hiding payment.

For example here I want hide check / money order payment method, if shipping method is flat. Here the payment method code is checkmo. you can get payment method code by simply printing that variable like echo $_code = $_method->getCode(); in same file. so here just add simple if else ,

<?php
    $methods = $this->getMethods();
    $oneMethod = count($methods) <= 1;
?>
<?php if (empty($methods)): ?>
    <dt>
        <?php echo $this->__('No Payment Methods') ?>
    </dt>
<?php else:
    foreach ($methods as $_method):
       echo  $_code = $_method->getCode();


if($_POST['shipping_method'] == 'flatrate_flatrate') {
    if($_code == 'checkmo') {
        continue;
    }
}
?>

Here,

if($_POST['shipping_method'] == 'flatrate_flatrate') {
    if($_code == 'checkmo') {
        continue;
    }
}

checks the shipping method and skip the payment method which we don't want to display. That's it. Please comment here if you have any doubt.

Note:

 shipping_method => flatrate_flatrate
 payment_method   => checkmo

Use checkout_cart_update_items_before event:

<checkout_cart_update_items_before>
    <observers>
        <mymodule_observer>
            <type>singleton</type>
            <class>Mynamespace_Mymodule_Model_Observer</class>
            <method>updateMethod</method>
        </mymodule_observer>
    </observers>
</checkout_cart_update_items_before>

In the observer -> updateMethod() write following code :

$quote = Mage::helper('checkout/cart')->getCart()->getQuote(); 
$shippingMethod = $quote->getShippingAddress()->getShippingMethod();
if($shippingMethod){
    $quote->getShippingAddress()->setShippingMethod(null);  //setting method to null
    $quote->save(); 
}