Is this a limitation of the custom JSON field, where it cant be used like any database?

The custom_json transaction is not in any way a database. All the custom_json transaction is is a way to have a transaction that doesn't have any side effects. An example of a similar thing in Bitcoin would be sending 0 BTC to 0x0 with a certain message. That's all a custom_json does. If someone creates a custom_json transaction transfer krnel 5 cats and that transaction is included in a block nothing happens. The Steem nodes don't add an entry to a database saying that now @krnel has 5 more cats or something. The only thing that happens is that now if you ask a Steem node what was in that block, you will see a bunch of transactions, one of them being a custom_json transaction transfer krnel 5 cats. I could create a custom_json transaction saying sdadg asdgsad sdfasd asdf and none of that would be entered in any database (not like there would be any reason to), but will be entered in a block.

So why would this be useful for DApp creation? All you can do is write a message in a transaction to the blockchain without any side effects. But what this means is that my Stratos DApp can look for when @alice creates a transfer_stratos custom_json transaction. Then it can rely on a shared protocol; everyone running Stratos agrees that when someone creates a transfer_stratos custom_json transaction, they decide that that means that they will update their internal ledger accordingly.

So let's say Alice creates a custom_json transaction transfer_stratos 10 bob (this means 'transfer 10 SRTS to Bob', but written in a way that's easier for computers to understand). That transaction is included in a block, but the Steem nodes don't do anything about it. Again, they don't update a database or anything. They just include that transaction, charge Resource Credits, and ignore it. But Alice and Bob and many other users in Stratos have agreed that when anyone creates a transfer_stratos custom_json transaction, they have an intent to transfer SRTS to someone else (again, this is just a shared belief and doesn't mean anything on the blockchain level). So when a Stratos node running the Stratos software (connected to a Steem node) sees the transfer_stratos transaction and updates the internal balances to remove 10 SRTS from Alice's balance and add 10 to Bob's balance. Now every Stratos node agrees on this new update, and Alice has successfully transferred 10 SRTS to Bob (this actually means that every Stratos node agrees that the transaction happened, and so they updated their ledger accordingly).

Here's a post where I explain the same thing in more detail, including cases of malicious actors trying to hack the Stratos network, and explanations of how this relates to Steem Monsters and steem-state (note that this is before the rebrand from Engine to Stratos): https://steemit.com/steem/@shredz7/how-engine-works.

I'm glad to see you interested in this as it is a fascinating topic -- if you have any more questions feel free to ask!