To set up custom order/quote statuses, go to Menu > System > Custom Setup > Sales. On the sales tab, there are buttons to set up both quote and order statuses.
Clicking on either one of them will open a form that looks like this.
Next enter the custom statuses into the form.
Note: Checking the box under DFT will set that particular status to be the default status that gets applied to a new quote or order.
Once the custom statuses have been created, click close.
Note: The text in these boxes is what will be displayed next to the fields on the status tabs. The fields are set to "Status:" by default.
Now the statuses can be applied to an order or quote by going to the status tab and selecting the status from the drop-down.
Note: To add the status column to a quote or order list, enter "strOrderStatus" in the "Add Columns:" field.