The first issue is not with the code, but with the user's assumptions.
That is the very reason why custom entropy is not proposed in the GUI.

The second issue with custom entropy and the multiplication is real; thank you for pointing it out.

I too believe that the custom entropy option should be removed from the code.
Actually, I did remove it 6 months ago:
https://github.com/spesmilo/electrum/commit/e0c38b31b40b42138527e9fd3f4bad78e0b12802

and I later reverted that commit because users were complaining.