These should be grouped by state.
It may be worth splitting commerce_order_status_options_list() into one that does #checkboxes options and one that does #select options, but here's a patch that fixes the problem in the meantime.
Skitch for the win! Patch for the better win! Committed.
Automatically closed -- issue fixed for 2 weeks with no activity.
Drupal is a registered trademark of Dries Buytaert.