If you would rather the items be in a separate folder but still be able to update against the catalog you can also use Break Catalog Link.
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Make the Standard line current.
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From the Edit menu and select Break Custom Catalog Link.
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Click Yes when you see a confirmation message.
Notice that the Standard now appears as a green outline level.
If you step into this Outline level, you would see that the items within the Standard now appear as normal product lines and have been multiplied by the number of Standards that were originally there. Notice that the header is the same green, indicating that you have stepped into an Outline level.
If you were now to update against a catalog, all of the products in this Outline level would update against the current manufacturer catalog and not the Custom Catalog from which they came.
You can later Flatten the Outline level from the Edit menu.