Greetings!

When using chatroom mode, it prompts the user to select an access level.

We do not want users seeing the available access levels, public is always ok - guests are not allowed to chat, or wish to restrict to one level only (chatters).

Users should never see Joomla ACL groups, for what it's worth.

Greetings again,

that is a predefined feature of the component when you are creating new rooms in frontend.

You can assign certain groups to be authorized to create new rooms, but take care they will be able to choose which access level the chatroom will be assigned to (not Joomla ACL user group, they are access levels)

Also notice that access levels showed are those belonging to the current user and not higher, this happens even in the Joomla core when you let a user to create an article in frontend.
For what it worths this is 100% correct, i don't get a problem in this behavior

That's what I get for testing with a Super User account!!