The same applies to other resources like domains, subnets and realms which have associated smart proxies. In theory we can use .authorized and only show the proxies on the form which the user has access to, but in practice this means a user who has edit permissions on a domain but no rights to view the associated smart proxies might inadvertently unset or change the associated proxy.

Our forms need to be smarter about associations to other resources that the user doesn't have access to.

Once a host group is created it is not possible to change puppet classes from within the host group once hosts are associated to it. However it is possible to associate puppet classes from the Configure -> Puppet -> Puppet Classes tab and check box them so they will work. The other issue is it's not possible to populate parameter overrides since I receive the error "Validation failed: Taxonomy has already been taken"

This does not seem related to this authorization issue. Please open a separate issue unless there's an existing one for the issue you have.

Edit (domcleal): #13620