We have been putting up with the tray in Layout Builder for quite a long time.
In order to make this work, we expanded its width in #3119481: Allow making the Layout Builder tray wider → and re-implemented a live preview in a new way - see:
However, while this has sort of worked, there have been constant little problems, the usability isn't nearly as good as Panopoly 1.x, and a possibly unsolvable problem with previews being styled differently in the tray than they will be when actually used (which kind of defeats the purpose of a preview).
So, I'm proposing we start using Layout Builder Modal → and return to doing our previews the old way. This should get our usability back to where it was, completely eliminate the styling problem, and hopefully have fewer weird edge cases.
Fixed
2.0
Magic
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Is there a possibility of adding an option to continue using the off-canvas dialog instead of a modal? When creating custom blocks, the preview is displayed directly in the Layout Builder interface, not the tray, so there are no problems with it being styled differently. And having the live preview directly in the Layout Builder interface provides a a simpler experience when designing a page than having the page obscured by a modal dialog does.