Please disregard this post and my foolish question. That is what I get for not sleeping.
I remember now that to get a category to appear as a sibling of the 'Site administration' category, I must define it in the plugin's local_foo_extend_settings_navigation() function in lib.php. For example:
function local_foo_extend_settings_navigation( settings_navigation $nav, context $context ) { $cat = navigation_node::create( 'Foo administration' ); $nav->add_node( $cat ); }