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The tip was wrong. Marking something as "Verified" is what does the trick. If something that is marked "Verified" hasn't changed for a week (I think), it will be excluded from the default searches.
Marking something "Unit Tested" does not affect any process or workflow.
The states are defined in the database, but there is currently no interface for customizing them. In the database, a state essentially has a name, a purpose (preparing, in-progress, or done), the type of record it's associated with (story, task, defect, project, component, etc.), and a list of states it naturally progresses to (prepare->open, open->closed, etc.). The purpose of the state determines the color coding of the issue. The state progression is only used if the feature is turned on that limits the available next state to those defined by the State record.
So, the list of states available by queries is the set of all states which have been defined for issues in the database. There's just no way to edit it right now. How important is it that people can edit the states?
For hiding completed projects, what do you want to hide them from? I think projects whose state is "Complete" or "Prepare" are currently hidden from the Issues tab. They could also be hidden for the issue project assignment combo box, and the query project list.
For me editing the states aren't as important as just knowing what the various progressions are supposed to be, like for tasks it is supposed to be Prepare -> Open -> Completed. I see what you mean about completed projects, I was looking on the issue assignment combo box. Yes will add a feature request to hide all completed tasks there. I can see why you might want to keep them visible for query selection, though.