Unknown choice appears in dropdown on form and the choice also appears with a blue font color in a list view.
If no issues are found with the sys_choice records seen here:
...then the likely cause is the field 'Default value' in the related sys_dictionary record contains that value as seen here:
Ensure the 'Default value' in the related sys_dictionary record contains the expected value. In this scenario, 'TestChoice' should be removed.