any% implies that it should allow unlimited continues, or at the least another category should be included

I think it's to make runs done on the AES and MVS versions fair. Using the MVS version allows runners to credit feed their way through the run. On the AES version it is never to your advantage to die.

Why not just separate them into two sub-categories so that people who arent actual wizards can try playing and beating the game?

The rule was created by a previous mod. It's there as a quality standard, and stops people submitting glorified lets plays where they credit feed their way through the game.