That was exactly my first impression too …
Yes, this is/was true for me too … But, after some initial frustration/annoyance I found I was still able to stick with my custom palette, for ~90% of my needs (achieved by not having any of the category filtering buttons active) … plus use the category filtering buttons (only as necessary) to access lesser used tools.
This approach enabled me to get rid of the LHS palette from my custom workspace layout - as I was using it mostly for less-used tools (but only 'cos I needed to have them somewhere) - whereas, now I don’t need them in my custom workspace 'cos I can access them via the buttons.
See my layout above to see how clean/simple this is (for me, at least).
John M