When updating the tags for a set of records I often use the dropdown for a tag and select the desired option (very helpful) but with the Genre when I click on the dropdown I see the entire list of options, not the options used in the set of current selected records. I'd like to see just the options used in the selected set.
Genre is, afaik, the only list with pre-defined values - that is why you see that list.
Limiting the list only to the ones already in the selection would then deprive you of the entries for pre-defined genres which you must use if you address only-V1-capable devices. otherwise you don't see that genre.
I agree with you, that it would be nice if the existing list was expanded by the user-defined genres (from the selection) and perhaps show these in italics to point out that they are not standard ones.