I am using the default folder groups within Ubuntu/GNOME software center, Utilities and Sundry.
I have noticed Terminal is marked as a utility yet this appears directly in Show Applications > All Applications rather than in the folder Utilities, why?
In effect this stops me from organizing apps as I would like. Where do these overriding rules exist?
This is simply because the "app folder" named Utilities is not associated to the "Utilities" category. By default the Utilities app folder is associated to only the "X-GNOME-Utilities" category.
So in order to move Terminal into the Utilities app-folder, you may add X-GNOME-Utilities category to the Categories= line of the .desktop file associated to the Terminal application.
An arguably simpler and user-friendly way would be using a GNOME shell extension called "Appfolders Management extension". This extension provides
An easy way to manage "appfolders" (folders in the applications view) directly from the applications view.
Right click on an app icon and you'll get the options to add or remove the app from certain app-folder(s) and create new app-folders.
You can also right click on an app-folder and associate categories to the app-folder.