Absolutely.
This idea would be constantly used.
Perhaps we could go further to allow a small text box to type what we are doing or our status. Like, when you click on the friend and how you might normally select "find", there would be a new button called "Status". You click it and it says something they've typed, like "Roleplaying", "Busy", "Let'sTalk" or something of the like. That way learning all sorts of different color codes isnt necessary.
The status could also be found for non-friends by them clicking on their names in general and the little box pops up with a little "status" button. Maybe to edit your status, you click on yourself and change it in the same spot. Just like with changing your bio.