Needed to set dual Item types to a single model template.
Solution
Got the PAX file modified to as shown below highlighted:
<PaletteEntry id="d2">
<References/>
<Presentation name="Model" description="NX Example with datum CSYS">
<PreviewImage type="UGPart" location="${UGII_BASE_DIR}/ugii/templates/model_template.jpg"/>
</Presentation>
<ObjectData class="ModelTemplate">
<Filename>@DB/model-plain-1-mm-template/A</Filename>
<Units>Metric</Units>
<ItemType>Item,Design</ItemType> <RelationType>master</RelationType>
</ObjectData>
</PaletteEntry>
This showed drop down to add different Itemtypes while creating new parts.
PS: (User can add as many Item types he needs, else he can also use "Any" to show all)
Notes and References
IR 9860243
Hardware/Software Configuration
Platform: INTL64
OS: windows
OS Version: 10_1909
Product: NX
Application: NXMANAGER
Version: V1926
Function: FILE_NEW
Ref: 002-8523056