I know this is 2 years old and I know you can make custom categories that we can change the color of, but "we" the users shouldn't have to. Hard lore defaults like groups(or factions) or as Witty Cukoo said - Fauna, flora, history - should be baked in. With the ability to color change them.

If you won't do that, at LEAST freaking have it so that any custom categories we make get ADDED to the drop down found in the top left of a lore card. The way this is currently set up legit pisses me off.

Oh, you want your locations to be colored red? Sorry you can't use the base entry type then. You need to make a custom one with the same name. What's that? How do you add your lore entry to the new codex type? Oh you know... assign that "custom" category to one of the existing types (you must do this, its not an option), then add tags. Also you're limited to those 10 colors, no color wheel for you. How do you later move it to a different category? Use the drop down? Pft. NO. Edit the entries tag. Does this make the drop down and base entry types useless for anyone with a semi-involved story? YEP.

I hate this ui/design decision with a passion

You can create your own categories. Click on the sprocket at the top right of the Codex and click: add New. You'll need to label the new title. There a bit more to it, but there is a white paper that explains it.

This feature, custom categories, already exists.

You can make your own in the tag slot.