HD and Level not stacking
 

Currently HD are not being counted for the awarding of ability boosts, only class levels. For example, if I make a bugbear (3 racial Monstrous Humanoid levels/HD) and give him 1 level of whatever (For a total of 4), HL does not give an ability boost, it says I need 3 more levels.

I believe this is working as intended? Otherwise high-hit-dice monsters would get ability boosts right out of the chute, which I don't think is right.

I've been researching this, and I think we may have missed something - MM pg 290 says that a character with hit dice doesn't get any ability score increases for the race's default HD, but does get them for every 4 HD. I think what that means is that the 3 HD Bugbear gets an ability score increase once it has 4 HD/levels, but a 4 HD creature won't get their first ability score increase until 8 HD/levels.

I believe that is correct. That is the way I have always run things anyway.

So a Bugbear gets an ability increase at level 1, but a creature that starts with 4 HD doesn't get any until level 4? That seems pretty weird...

I believe the critter that starts at 4 HD already has the ability bonus factored in to its stats.

One thing I noticed about hero lab is that it cannot assign additional racial HD to a critter, only class level HD. (It is a character generator, and not a monster generator.) I believe this was addressed in another post on these boards, so I'm not complaining, just pointing it out.

So a 3HD critter that gains a class level should get an ability boost, just as if a 3rd level character gains a new class level.

As for the advanceing HD problem, I made a class called "animal HD" that I can add to advance animals. There are some problems though, namely how it works as multiclassing rather than addition to a class that already exists (so the saves are a little off)... but it works well enough.

It would be a chore, but one could concievably create a new class for each monster type.

For that animal HD multiclassing thing - you may want to revise your races to go along with it - If you're doing it that way, all your races should represent the 0-level state of the race. The race can bootstrap a number of levels of that class equal to its starting HD. That way your BAB/saves/skill points are correct for any level. I'm not sure if regular monsters are restricted to 20 HD. This will impose that limit on these races.

My thoughts for the far future "better monster handling" project include something like this. At this point, my ideas on the subject include making a Hit Die thing that would show up in the levels list if your race/type could advance by HD. There would also be a new category of components for types/subtypes. The type things would tell the hero which of them was currently active, and the HD thing would read that to determine the HD size, attack/save progressions, etc.

P.S.
At this point, posts like "When you do that better monster handling project could you..." will not generally be helpful. I haven't talked about everything I've been thinking about, so there's a decent chance you'd mention something I've already thought about, and by the time I get to that project, this thread will be pretty old and buried in the list. Sorry, I know you want to talk about it now that I've mentioned a project, but it wouldn't help much at this point.