I believe that you are saying that you are trying to limit the choices available in the drop down list.
To answer the second part
secondly, to have a filter for the list that is base on another field in Contacts, 'Category'. In other words I want the list to show all names, other than Fred's that have a field 'Category' value of "Referent".
On the form where you have the drop down list, it may say that the list is coming from either a report or more likely the default record picker. make a report of Contacts which is filtered based on Type = Referent.
Then set the form properties to use that report for the drop down list.
There is not an easy way to not show "Fred" in your example.
