I understand your frustration. The general category headings are "primitive" from an auction house standpoint. They probably make perfect sense to somebody who spends 18 hours a day writing code though. I managed to get the desired results by requesting the desired sub headings starting from the top heading and working all the way down in the format that admin would need to see it. As an Example:
Collectibles>Badges & Patches>Pinbacks
Then you could have sub-headings for what kind of pinback it is under that as the category fills in.
More to follow on the rest of your post.
Regards
ED