The "working-ground" (kammatthana) of the five hindrances My question is about the following passage (taken from the section on the five hindrances here):


  One who earnestly aspires to the unshakable deliverance of the mind
  should, therefore, select a definite "working-ground" of a direct and
  practical import: a kammatthana1 in its widest sense, on which the
  structure of his entire life should be based. Holding fast to that
  "working-ground," never losing sight of it for long, even this alone
  will be a considerable and encouraging progress in the control and
  development of the mind, because in that way the directive and
  purposive energies of mind will be strengthened considerably. One who
  has chosen the conquest of the five hindrances for a "working-ground"
  should examine which of the five are strongest in one's personal case.
  Then one should carefully observe how, and on which occasions, they
  usually appear. One should further know the positive forces within
  one's own mind by which each of these hindrances can best be countered
  and, finally, conquered; and one should also examine one's life for
  any opportunity of developing these qualities which, in the following
  pages, have been indicated under the headings of the spiritual
  faculties (indriya), the factors of absorption (jhananga), and the
  factors of enlightenment (bojjhanga). In some cases, subjects of
  meditation have been added which will be helpful in overcoming the
  respective hindrances.


The bolded emphasis is mine. My question is, what is meant by making the "conquest of the five hindrances a working-ground"? Kammatthana is later defined as the subject of meditation (literally meaning "working-ground"). 

Instructions are given right after the assertion but I am confused as to how one might extend this into everyday life and not merely during meditation. Furthermore, meditation often has some other object of focus (namely, the breath, the movement of the abdomen etc.) does making the five hindrances the working-ground change this?

More practically, if a thought arises which is unwholesome (not during a sit, but in everyday life, since it is stated above that we should make the "structure of [our] entire life" based on the working-ground) should we try to categorize the thought into one of the hindrances, then accept it merely as a thought, as part of a process which does not constitute our identity and then watch it impassively until it fades? Or how should we deal them?
There is not much to say about it, the sutta named Subhasutta (numbered MN 99) has plenty of times the word kammatthana -- also translated "occupation" in this translation.

Here is the definition from the famous ATI glossary:


  kammatthana Literally, "basis of work" or "place of work". The word
  refers to the "occupation" of a meditating monk: namely, the
  contemplation of certain meditation themes by which the forces of
  defilement (kilesa), craving (tanha), and ignorance (avijja) may be
  uprooted from the mind. In the ordination procedure, every new monk is
  taught five basic kammatthana that form the basis for contemplation of
  the body: hair of the head (kesa), hair of the body (loma), nails
  (nakha), teeth (danta), and skin (taco). By extension, the kammatthana
  include all the forty classical meditation themes. Although every
  meditator may be said to engage in kammatthana, the term is most often
  used to identify the particular Thai forest tradition lineage that was
  founded by Phra Ajaan Mun and Phra Ajaan Sao.


Anyway, the end of your question is more important -- i.e. you asked:


  More practically, if a thought arises which is unwholesome (not during
  a sit, but in everyday life, since it is stated above that we should
  make the "structure of [our] entire life" based on the working-ground)
  should we try to categorize the thought into one of the hindrances,
  then accept it merely as a thought, as part of a process which does
  not constitute our identity and then watch it impassively until it
  fades? Or how should we deal them?


Dividing your life into two parts, "trying to to get the citta into samadhi" and "not trying to get the citta into samadhi" is not a good idea, even for people who are not bikkhus (mnks). What you can do in daily life is sati sampajanna (clear and constant awareness), like when you walk, when you eat and so on -- but getting citta (mind) into the samma samadhi (right concentration) needs seclusion, which is exactly what samma samadhi is.

So first a bit of vocabulary...

For the buddha, "living in the present" means having the citta (mind) in samadhi (concentration) of the first jhana (or higher) as expressed here, and it turns out that "the here and now" is always pleasant, 

so,


the citta is in the samadhi of the first jhana = living in the pleasing here and now
the citta is not in the samadhi of any jhana = not living in the present moment.


The buddha also says that it is easy for puthujjanas (wordly people -- who probably have some incorrect views e.g. about the doctrine) to confuse the samadhi of the jhanas with Sallekha (meaning "effacement").

The puthujjanas, who say that "watching thoughts come and go" is "living in the present moment", say that because watching sensuality is all they know -- and they do not know how to experience something else than sensuality. Those puthujjanas are full of thoughts 24/7, so they say that when they watch thoughts they "watch reality".

What the puthujjanas who invented dry meditation (i.e. "meditation without concentration") do is, at best (and it is really at best), is sampajanna (clear awareness) -- since they do not have sati (mindfulness or awareness or concentration), it's not really sati·sampajanna (concentrated or continuous clear awareness): 


  "And what is the development of concentration that, when developed &amp;
  pursued, leads to mindfulness &amp; alertness? There is the case where
  feelings are known to the monk as they arise, known as they persist,
  known as they subside. Perceptions are known to him as they arise,
  known as they persist, known as they subside. Thoughts are known to
  him as they arise, known as they persist, known as they subside. This
  is the development of concentration that, when developed &amp; pursued,
  leads to mindfulness &amp; alertness.


meaning they watch vedana-sanna (feelings and perceptions), and thoughts come and go, and they try to pass that as yoniso manasikhara (clear seeing r insight).


  "And what is the development of concentration that, when developed &amp;
  pursued, leads to the ending of the effluents? There is the case where
  a monk remains focused on arising &amp; falling away with reference to the
  five clinging-aggregates: 'Such is form, such its origination, such
  its passing away. Such is feeling, such its origination, such its
  passing away. Such is perception, such its origination, such its
  passing away. Such are fabrications, such their origination, such
  their passing away. Such is consciousness, such its origination, such
  its disappearance.' This is the development of concentration that,
  when developed &amp; pursued, leads to the ending of the effluents.
  http://www.buddha-vacana.org/sutta/anguttara/04/an04-041.html


There are even toxic puthujjanas who hype the "acceptance of any experience", "embrace the present moment" (which is, for those people, watching thoughts and sensations). Those puthujjanas fail to see that there are meritorious vedana-sanna, meritorious thoughts -- and conversely demeritorious vedanna-sanna, demeritorious thoughts -- and that letting demeritorious experience arise is very bad.

Sati·sampajanna is what people today call "mindfulness". It is good at preventing future lusts arise (or at least preventing them from becoming established), it is "what guards the senses" (see here and here -- but to suspend the bad feelings, you must get the citta into samadhi of at least first jhana, precisely because the vedanna-sanna of this samadhi is the meritorious vedana-sanna.

And to get the citta into samadhi, you have to memorize and put into practice right view and right intention, so first being physically secluded from other humans for a few hours or days -- then it is mano (mind) which has piti (joy associated with concentrative absorption) and the kaya (body) has passambhati (calm) then sukhaṃ vediyati (experienced ease), and the citta (mind) has sukhha (well-earned ease) then samadhi (concentration).

THe  buddha explains how he got right samadhi here and here (renunciation) -- and there's a 
a page with a few quotes on nekhamma (renunciation) here.

Once he had right samadhi, the citta could know how kamma-jati (karma and birth) and dukkha (misfortune, dissatisfaction) works.
So like the buddha said, sati·sampajanna is what he did first, judging his thoughts and classifying them into two (i.e. "meritorious" and "demeritorious"), destroying the bad thoughts with seeing the danger of bad thoughts, but it is precisely this sati·sampajanna (=situational wisdom, that is: In each moment one calls to mind whatever is necessary to master the given task ) which is transformed into samma samadhi. So do not divide your life into "meditation" and "non meditation". Later on, this samma smadhi is used to turn the citta towards āloka·saññaṃ manasi karoti (perception of light) and yoniso manasikhara (clear seeing).