The ViewData item that has the key 'XXX' is of type 'System.Int32' but must be of type 'IEnumerable<SelectListItem>'

The error means that the value of CategoryList is null (and as a result the DropDownListFor() method expects that the first parameter is of type IEnumerable<SelectListItem>).

You are not generating an input for each property of each SelectListItem in CategoryList (and nor should you) so no values for the SelectList are posted to the controller method, and therefore the value of model.CategoryList in the POST method is null. If you return the view, you must first reassign the value of CategoryList, just as you did in the GET method.

public ActionResult Create(ProjectVM model)
{
    if (!ModelState.IsValid)
    {
        model.CategoryList = new SelectList(db.Categories, "ID", "Name"); // add this
        return View(model);
    }
    // Save and redirect
}

To explain the inner workings (the source code can be seen here)

Each overload of DropDownList() and DropDownListFor() eventually calls the following method

private static MvcHtmlString SelectInternal(this HtmlHelper htmlHelper, ModelMetadata metadata,
  string optionLabel, string name, IEnumerable<SelectListItem> selectList, bool allowMultiple,
  IDictionary<string, object> htmlAttributes)

which checks if the selectList (the second parameter of @Html.DropDownListFor()) is null

// If we got a null selectList, try to use ViewData to get the list of items.
if (selectList == null)
{
    selectList = htmlHelper.GetSelectData(name);
    usedViewData = true;
}

which in turn calls

private static IEnumerable<SelectListItem> GetSelectData(this HtmlHelper htmlHelper, string name)

which evaluates the the first parameter of @Html.DropDownListFor() (in this case CategoryID)

....
o = htmlHelper.ViewData.Eval(name);
....
IEnumerable<SelectListItem> selectList = o as IEnumerable<SelectListItem>;
if (selectList == null)
{
    throw new InvalidOperationException(String.Format(CultureInfo.CurrentCulture, 
        MvcResources.HtmlHelper_WrongSelectDataType,
        name, o.GetType().FullName, "IEnumerable<SelectListItem>"));
}

Because property CategoryID is typeof int, it cannot be cast to IEnumerable<SelectListItem> and the exception is thrown (which is defined in the MvcResources.resx file as)

<data name="HtmlHelper_WrongSelectDataType" xml:space="preserve">
    <value>The ViewData item that has the key '{0}' is of type '{1}' but must be of type '{2}'.</value>
</data>

according to stephens (user3559349) answer, this can be useful:

@Html.DropDownListFor(m => m.CategoryID, Model.CategoryList ?? new List<SelectListItem>(), "-Please select-")

or in ProjectVM:

public class ProjectVM
{
    public ProjectVM()
    {
        CategoryList = new List<SelectListItem>();
    }
    ...
}