There are 2 custom materials in your list with the name "custom materials". Solidworks creates "custom materials" group automatically every time you start it so you can't remove it. You need to give your custom materials file a different name. I also manually removed all entries in the default "custom materials" group so it is empty and stays empty that way. You need to add the path to the folder your new custom materials file resides inside. Go to system options - file locations - material database. That has worked for me with SW 2013 not sure about higher versions.
I have heard from cases where mapped network drives or UNC path ways caused issues maybe that will get you some where?
I will try this out for sure.
I will always use UNC paths for any network shared resources.