Actually since 1.5 order statuses can be defined in Admin section and xml is not preferred way of adding/changing states or statuses. Please make a difference between state and status. State is 'processing' status is 'credit card payment received'

Actually since 1.5 order statuses can be defined in Admin section and xml is not preferred way of adding/changing states or statuses. Please make a difference between state and status. State is 'processing' status is 'credit card payment received'

Update: Order statuses can be created and modified in admin/sales_order_status/, no need to do anything in XML You can assign a status only if order is in appropriate state. By default order goes into Processing state when it is invoiced or shipped.