Can Activity Type standard field be added to custom report type?
I am not able to see this as a field in the layout editor.
This has been an issue since Custom Report Types first came out in the Summer '07 release. You can vote for adding this standard activity field to custom reports here: https://success.salesforce.com/ideaView?id=08730000000BrFZAA0
I'm a bit confused by your question. Activity is essentially a child object of other objects (parent objects). If you go to create a custom report, you first need to select an "A" object you want to get activity related information, for example: Opportunities. Once you've done that, then you can select Activity as the "B" object and will get all of the Activity Fields associated with Activities. That should give you Activity fields like "Account", "Call Type", "Group Event Type", "Is Child", "Show Time As", "Status", "Subject", "Task", etc.
When creating the custom report, if you select Case first as "A", then Activity 2nd as "B", I show Type as a Field for Case as I'd expect it to be. Activity Fields also appear as expected. Type is not an Activity Field, it belongs to Case.
In this particular situation, Activity gets Type passed to it from Case because Activity is a child of Case. When viewing an Activity on a Case, Type is the Type of Case. Those are the same field values that exist under Case when viewing the Case's field Type. If you create a custom report with Case and Activity, Type will only appear under Case.
For Activity, Type is not one of it's standard fields, its an implicit related field. The same would occur if looking at Activity on Opportunity. The values for Type would be those found under Opportunity Type.
Below is a screenshot from the Edit Field Layout Properties from the Custom Report Editor where I've highlighted Case Type. It illustrates why Activity Type would not appear in the report. Only one
Type value would be needed for an Activity based on a Case.