diff --git a/demos/blocklyfactory/app_controller.js b/demos/blocklyfactory/app_controller.js
index d9a092132..58477cb41 100644
--- a/demos/blocklyfactory/app_controller.js
+++ b/demos/blocklyfactory/app_controller.js
@@ -304,6 +304,9 @@ AppController.prototype.onTab = function() {
     FactoryUtils.hide('workspaceFactoryContent');
 
   } else if (this.selectedTab == 'WORKSPACE_FACTORY') {
+    // Update block library category.
+    var categoryXml = this.exporter.getBlockLibCategory();
+    this.workspaceFactoryController.setBlockLibCategory(categoryXml);
     // Hide container of exporter.
     FactoryUtils.hide('blockLibraryExporter');
     // Show workspace factory container.
diff --git a/demos/blocklyfactory/index.html b/demos/blocklyfactory/index.html
index c7792cd37..c866d7b35 100644
--- a/demos/blocklyfactory/index.html
+++ b/demos/blocklyfactory/index.html
@@ -715,7 +715,8 @@
     <category name="Variables" colour="330" custom="VARIABLE"></category>
     <category name="Functions" colour="290" custom="PROCEDURE"></category>
     <sep></sep>
+    <category name="Block Library" colour="260" id="blockLibCategory"></category>
   </xml>
 
 </body>
-</html>
\ No newline at end of file
+</html>
diff --git a/demos/blocklyfactory/workspacefactory/wfactory_controller.js b/demos/blocklyfactory/workspacefactory/wfactory_controller.js
index 10fce767b..2a24660bb 100644
--- a/demos/blocklyfactory/workspacefactory/wfactory_controller.js
+++ b/demos/blocklyfactory/workspacefactory/wfactory_controller.js
@@ -232,7 +232,6 @@ WorkspaceFactoryController.prototype.removeElement = function() {
     // when there are no categories.
     this.allowToSetDefaultOptions();
   }
-
   // Update preview.
   this.updatePreview();
 };
@@ -288,12 +287,6 @@ WorkspaceFactoryController.prototype.clearAndLoadElement = function(id) {
     this.view.setCategoryTabSelection(this.model.getSelectedId(), false);
   }
 
-  // If switching from a separator, enable workspace in view.
-  if (this.model.getSelectedId() != null && this.model.getSelected().type ==
-      ListElement.TYPE_SEPARATOR) {
-    this.view.disableWorkspace(false);
-  }
-
   // If switching to another category, set category selection in the model and
   // view.
   if (id != null) {
@@ -305,16 +298,19 @@ WorkspaceFactoryController.prototype.clearAndLoadElement = function(id) {
 
     // Selects the next tab.
     this.view.setCategoryTabSelection(id, true);
+
+    // Mark all shadow blocks laoded and order blocks as if shown in a flyout.
+    this.view.markShadowBlocks(this.model.getShadowBlocksInWorkspace
+          (this.toolboxWorkspace.getAllBlocks()));
+    this.toolboxWorkspace.cleanUp();
+
+    // Update category editing buttons.
+    this.view.updateState(this.model.getIndexByElementId
+        (this.model.getSelectedId()), this.model.getSelected());
+  } else {
+    // Update category editing buttons for no categories.
+    this.view.updateState(-1, null);
   }
-
-  // Mark all shadow blocks laoded and order blocks as if shown in a flyout.
-  this.view.markShadowBlocks(this.model.getShadowBlocksInWorkspace
-        (this.toolboxWorkspace.getAllBlocks()));
-  this.toolboxWorkspace.cleanUp();
-
-  // Update category editing buttons.
-  this.view.updateState(this.model.getIndexByElementId
-      (this.model.getSelectedId()), this.model.getSelected());
 };
 
 /**
@@ -608,7 +604,7 @@ WorkspaceFactoryController.prototype.loadCategory = function() {
   // Switch to loaded category.
   this.switchElement(copy.id);
   // Convert actual shadow blocks to user-generated shadow blocks.
-  this.convertShadowBlocks_();
+  this.convertShadowBlocks();
   // Save state from workspace before updating preview.
   this.saveStateFromWorkspace();
   if (isFirstCategory) {
@@ -1177,3 +1173,22 @@ WorkspaceFactoryController.prototype.importBlocks =
   reader.readAsText(file);
 };
 
+/*
+ * Updates the block library category in the toolbox workspace toolbox.
+ *
+ * @param {!Element} categoryXml XML for the block library category.
+ */
+WorkspaceFactoryController.prototype.setBlockLibCategory =
+    function(categoryXml) {
+  var blockLibCategory = document.getElementById('blockLibCategory');
+
+  // Set category id so that it can be easily replaced, and set a standard,
+  // arbitrary block library color.
+  categoryXml.setAttribute('id', 'blockLibCategory');
+  categoryXml.setAttribute('colour', 260);
+
+  // Update the toolbox and toolboxWorkspace.
+  this.toolbox.replaceChild(categoryXml, blockLibCategory);
+  this.toolboxWorkspace.updateToolbox(this.toolbox);
+};
+
diff --git a/demos/blocklyfactory/workspacefactory/wfactory_view.js b/demos/blocklyfactory/workspacefactory/wfactory_view.js
index d843a9365..ad855709c 100644
--- a/demos/blocklyfactory/workspacefactory/wfactory_view.js
+++ b/demos/blocklyfactory/workspacefactory/wfactory_view.js
@@ -282,7 +282,8 @@ WorkspaceFactoryView.prototype.disableWorkspace = function(disable) {
  * @return {boolean} True if the workspace should be disabled, false otherwise.
  */
 WorkspaceFactoryView.prototype.shouldDisableWorkspace = function(category) {
-  return category != null && (category.type == ListElement.TYPE_SEPARATOR ||
+  return category != null && category.type != ListElement.TYPE_FLYOUT &&
+      (category.type == ListElement.TYPE_SEPARATOR ||
       category.custom == 'VARIABLE' || category.custom == 'PROCEDURE');
 };