Hello Jenny,
to hide application source types and applications from the selection of the external candidate you have to change / enhance the method RETRIEVE_DATA of the component controller of web dynpro component HRRCF_C_COVERLETTER_UI.
If you have a look at this method around line 80 you find even some example code as the SAP standard already hides the application source type 02 for agencies. Easiest is probably to add some code directly after the loop to exclude this application source type for agencies and remove the other entries from the value set you no longer use.
To hide application sources of a application source type which is still used you would have to add a similar logic there. If the currently selected application source type is the correct one, get the node information for the application source node. Remove the entries from the value set and update the node again. Furthermore you have to put in the same logic into method ONACTIONDDLB_CHANGED of the view controller VW_COVERLETTER to ensure the application source dropdown is adjusted correctly if a different application source type is selected by the candidate.
A second change will be necessary if you can not ensure that the recruiters will not use obsolete entries when entering applications manually. The component for the manual application entry by recruiters is ERC_C_APPL_MGMT_UI. Here the change will be a bit easier. The assistance class of this component is CL_HRRCF_M_APPL_MGMT_UI. This class has two methods GET_APPL_SOURCE_TYPE_LIST and GET_APPL_SOURCE_LIST which centralize the determination of the values for the dropdowns. Here I would add implicit enhancements at the end of both methods to remove entries from the lists before they are returned.
Best regards
Roman