Steps to reproduce the issue

Create category.
Selecting different category layouts (from template html/com-content/category) works as expected.

Create a category list menu item for that category.
The previously selected category layout displays correctly.

What does Choose a layout in the options tab do?
It lists article layouts from template html/com-content/article
When menu item used in front-end I cannot see anywhere that the selected article layout is used.

It looks like article_layout is only used in view/article not in view/category - which is what I would expect, so at this point it looks to me like a 'do nothing option'.

Expected result

Choose a layout in options tab lists category layouts from template html/com-content/category

I would expect this to provide a method to override the selected category layout.
I.E. could have 2 menu items with different layout / stylings for the same category article list.

Actual result

Choose a layout in options tab lists article layouts from template html/com-content/article

System information (as much as possible)

Joomla 4 RC5
PHP 7.4

Additional comments

Suggestions
(a) Simplest - remove Choose a layout from the options tab (category/default.xml).
(b) Change it so that it enables the site dev / admin to override the chosen layout for that category.