Breaking changes to how product categories and types (formerly custom product types) work in Shopify

Can anyone from Shopify provide clarity around the recent changes to product categories and product types?

It seems that types have been replaced by industry-standard categories—and much of what was stored in this field has been overwritten by suggestions (highlighted in purple) by Shopify. One of our brands appears to have lost thousands of product categories that had been previously set.

Product types replace what was previously referred to as custom types.

“Custom product types” used to default to the product type (now category) if blank. Seemingly not anymore—or, unclear.

It’s now possible to set product type and product category in collection conditions—but, it seems this doesn’t work yet! Shopify throws an error when you try to type into the category field and nothing shows in the dropdown.

Further, you can filter by product type but not by category. So, none of those suggested categories show up in collection filters.

Anyone know what is going on?