You can use as many or as few standard or custom objects as you want. However, the more custom content your level contains, the more likely it will be to get into the Experimental database. If all the stuff in the level is custom, there's a chance it'll get into the Normal database.
There shouldn't be anything under "custom objects" in KE. When you start a new project, it creates a folder for the project, and in this folder should be another folder called Sprites. All the stuff in the Sprites folder is the standard objects.