How do you delete a hidden value from a category item in RQM?

Chances are the value belongs to another test artifact type. Let's say there is a value "Cosmetic" in the Test Plan categories, and you try to create a value called "Cosmetic" in the Test Case categories, you will get an error message saying it's duplicate. The category value is unique across the entire project. I cannot find any documents about this, but it does work this way. The below feed will give you all the category values regardless test artifact types.

Looks like you are on RQMv5.0.1 or 5.0.2. In the old version 4.x for example, identical name of categories are allowed to create among those artifacts. I remember there is a defect which complains duplicated category when you create it if there is a deleted category in trash view with the same name. If you are not at v5.x, it is likely you may hit that defect.
The quick way to check is to try "add values" to the category and you will see the list of the available values, in which, if you see the one you are trying to create, it means it is existing value and you can simply add it to the category.