Dear TDrinky,
Thank you for posting in the Microsoft Community.
I understand that you have some doubts when using the calendar categorization function, and let me explain it to you.
I have read your description. You are right. The category function in the Outlook calendar indeed does not support IMAP accounts.
Please refer to this official instruction:
Create and assign color categories in Outlook - Microsoft Support
It clearly states in it:

If you want to use the category function, you can only configure the account as a POP type or use a Microsoft domain mailbox (Outlook/Hotmail/Live/MSN).
This is due to the system design. In my tests, whether it is the classic version of Outlook or the new Outlook, the situation is the same. Therefore, changing the version will not change this situation either.
I hope my explanations can provide you with some references. Feel free to post back if you need further assistance. Wish you have a good day!
Best Regards,
Ulrica.W - MSFT | Microsoft Community Support Specialist