I am interested in the different tools that can be used to create custom databases for targeted sequencing and how to trim the databases based on the amplicon size? Also, should custom databases contain species not assigned to a species level?
Not familiar with taxonomy databases, but I can always recommend SDL Multiterm. It is a customisable type of database that is used for storing terms and their explanations, create 'fields' between them etc. Hopefully the program can be of help for you, or at least point you in the right direction.
I have used RDP (http://rdp.cme.msu.edu/) and DADA2 (https://benjjneb.github.io/dada2/training.html) to construct custom databases from bacterial 16s genes. They also contain classifiers for fungal phylogeny if you don't need a custom database.
The database can contain OTU's that do not reach the species level, in general amplicon sequencing is not sensitive enough for species level identification.