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A few things come to my mind when I look at your formula:
@Contains expects the list you want to search to be the first argument, and the term or terms you want to search for in the list to be the second argument. Your formula looks as if you had it the other way around.
Second, @DbLookup may return unexpected results when a list (more than one value) is supplied for the key parameter. I don't know if this can occur in your case though. It certainly is not an issue if field 'MyReports' can only contain a single value.
Apart from that, it is possible to use @Formulas with Show Single Category. My experience is also that those formulas do work if they refer to one or more fields on the parent document (the document whose form contains the embedded view). It is true that @Commands do not work with Show Single Category, but your formula does not contain an @Command anyway.
Let me rephrase this. The @Commands work, it is the variable or field name that doesn't. If I hard code the MyReports the a group name such as "IS" then it works but because this is a field on the document, it does not.