Categories are in the Catalog ... Categories/Products ...

Product Types are in the Catalog ... Product Types ...

You add Categories and Products in the Catalog ... Categories/Products ... and you want to add Categories and within the Categories you add either Categories or Products, but never both to the same Category ...

Product Types are used to control the files used for adding, editing and displaying the Products ...

Zen Cart comes with 5 default Product Types ...

What are you changing/adding? Categories and Products or Product Types?

Did you try to make new Product Types?