Can not add new subcategories to any category --> need to delete bogus entry (edit)

That fixed it. I just started at last category I could add subcategories and then went down list and started deleted categories that were totally unused. One or two were same as an account name but other were just random expense accounts. Then I repeated until I was able to add subcategories to my "Vacation" category. Thanks.

I think I just discovered why the category list for creating a subcategory is useless. We don't need it. A subcategory can be created in the field where you want it to go in the first transaction where you need it - using colons --
Category:subcategory:subsubcategory .... etc.
Don't know how many layers it can go, but the form appears to be superfluous.