Typically you don't select a forum category there. That's for backend management to override the forum category assignment. CB GroupJive Forums will automatically create the forum category when the group is saved. If the group existed before CB GroupJive Forums simply resave the group to create its forum category. There does appear to be a bug with that dropdown though as it's using the wrong function for category select and have added a bug ticket to fix.

forge.joomlapolis.com/issues/7829

You don't create anything in Kunena for groups themselves or configure the forum assignment manually in your groups. When the group is created it will create it's Kunena forum category automatically. It also handles the access checks automatically. All you need to configure is a top level category where all these group forum categories will be stored and once created you need to specify it in CB GroupJive Forums parameters. If the groups existed before doing this resave the groups afterwards and it will generate their forum categories. The group forums are accessed from their forums tab in the group, but should also be visible to users in the kunena category index page.