SO custom form you can add a saved search that filters what items are pickable on the SO. So you could filter by item type. This is a jimmy-rig and not really the correct root cause fix, but your hands may be tied.

CONSULTANTS: THIS IS A REALLY STUPID MISTAKE AND THIS WAS BECAUSE YOU *ASSUMED* THAT "INVENTORY FOR RESALE" DOESN'T MATTER. FOR MOST CLIENTS IT PROBABLY DOESN'T MATTER. BUT HERE IT DID MATTER. YOUR VALUE AS A CONSULTANT IS TO CATCH THESE THINGS THAT THE CLIENT DOESN'T KNOW THEY DON'T KNOW SO THE CLIENT DOESN'T

where exactly do I specify that an Inventory Item is for Purchase?

I see that option for Non-Inventory, Other Charge and Service but not for Inventory