My genre is Western (or Drama, Magical Realism, Coming-of-Age, Action, Romantic Comedy, Short Stories). Why did BookyAI treat it like non-fiction?

It no longer does, from version 1.9.21. These genres are now recognised as fiction, so the New Book form offers the novel options (such as the narration) and the chapters are written with storytelling craft: scenes, dialogue and characters. True Crime is now treated as non-fiction. Romantasy, love stories and romantic comedies also get the romance heat level setting, and the voice previews ("Hear it") follow your narration and heat level.