The custom item type selection is the menu where you need to select what kind of custom item you would like to create. It should look like this:

There is a 'Cancel' button and a button for each custom item type currently supported by the plug-in and editor. The 'Cancel' button will bring you back to the item overview without adding a new custom item. All other buttons will bring you to the item edit menu for that specific kind of custom item.

As you can see, there is plenty of choice: you can create almost every tool in the game. I will list all possibilities alongside a brief description: