When editing an existing category, the logic should have been to prevent you from moving the category if it was the last remaining top-level category in its context.
When creating a new category as part of creating a random question, there should be no restriction.
This was started and usability tested as a Finnish Summer of Code project, and then Olli did further work on it in his own time to get it in shape for inclusion in Moodle 2.0. I reviewed all the code. There are a number of minor outstanding issues that will be fixed soon. See the subtasks of MDL-17284 for a list.
The goal of these changes is to:
* help teachers new to Moodle, so when they first see the quiz editing page, they don't go "Huh! What on earth am I supposed to do here?"
* help novice Moodle users understand and learn to use some of the more advanced quiz feature;
* but, without slowing down more experienced quiz users.
Naturally, with ambitous goals like that, we won't have managed to satisy everybody, but I think this change is a big step in the right direction.
There is extensive documentation on this project at http://docs.moodle.org/en/Development:Quiz_UI_redesign.
