Interesting, I wish more clients had this feature at the forefront.

How does it work in Gossip? Is the kind 2 list treated just like another list among follow sets? Some screenshots would be nice.

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Followed (kind 3) and Muted (kind 10000?) work just like custom lists, except you cannot rename them or delete them. You can add as many custom lists as you want. You can add new npubs to them. You can also go to a person page and flip switches to add/remove the person from any of your lists. And you can mark people as "private" on a list so when published it hides the fact they are on the list by putting them in the encrypted contents.

I will do a short video on it I think.

Does that mean I can view the feed of each of my custom lists and not the feed of my main contact list?

Yes. I have a 'news' list that only has news sources. None of that is 'followed' and doesn't show up in my following contacts list.