People have told me that I shouldn't use the root for daily use, but is it ok to make my account on have a UID of 0? And why are there so many groups? What groups should I add my user account to?

That would be making your account root. If you need root privileges, it is recommended that you su into the root account or use sudo.

Don't add yourself as uid 0. The point of the root user is to do system admin stuff and that's it. If you run as root you have essentially blown the whole security of unix out of the water and your box is not any more secure than the other os's. Make a user for yourself and create a group with the same as your userid. This way if you accidentally try to delete something essential it will not allow you to. If you find some bad malicious code when you execute it that code will run with your privs and won't be allowed to modify system code. So my point is the whole linux community will be better off if you instill this in new users and yourself. The groups are mostly for system accounts to run with very little privs so if they get compromised they run a with minimal environment.

Ok, so should I just have my UID be 500 as automatically set? And what about the user groups? Should I only belong to the group of my userid? What are all the other groups for?

I wouldn't add yourself to any group that you don't need to be in. 500 is fine as long as it isn't used by anyone else.

But what are all the user accounts and groups for? There are over 50 accounts and groups, and some of the groups don't even have any members.

Take Apache for instance it starts as root then drops privledges to the userid and groupid that is specified in httpd.conf

What is the user account "amanda" used for?

backups

Maybe the amanda backup server