Upgrade to TFS 2018.2 from 2012 Backlogs are broken - tfs

Question

We recently upgraded our TFS 2012 on premise server to TFS 2018.2. Things are mostly working but any project that had custom state/transitions will cause an error when trying to open the Backlogs page. The issue it is complaining about is related to Bugs. We replaced a "Complete" state with a state of Closed.
The error I get is :
TF400917: The current configuration is not valid for this feature. This feature cannot be used until you correct the configuration.
Learn about how to correct your configuration
Details about the validation error appear below:
The following element contains an error: RequirementBacklog/States. TF401098: This element defines the states for work items that appear on your backlog. The state configuration is incorrect. Each work item on this backlog must have one state with the type 'Complete'. The following work item type does not have any state with the type 'Complete': Bug.
Steps I have tried:
1) Using TFS Process Template editor in VS, I have change the Closed state to Complete. No success.
2) I have attempted to export the processconfig using witadmin. The file I get does not have any bug section at all. So using examples online, I attempt to add it but it complains about other sections in the file being incomplete. On a side note, if I export the process config and then immediately try to import it, it fails complaining about singleName not specified and other issues. I will attach the file I get when I export the file if it helps.
<?xml version="1.0" encoding="utf-8"?>
<ProjectProcessConfiguration>
<FeedbackRequestWorkItems category="Microsoft.FeedbackRequestCategory" pluralName="Feedback Requests">
<States>
<State type="InProgress" value="Active" />
<State type="Complete" value="Closed" />
</States>
</FeedbackRequestWorkItems>
<FeedbackResponseWorkItems category="Microsoft.FeedbackResponseCategory" pluralName="Feedback Responses">
<States>
<State type="InProgress" value="Active" />
<State type="Complete" value="Closed" />
</States>
</FeedbackResponseWorkItems>
<RequirementBacklog category="Microsoft.RequirementCategory" pluralName="Backlog items" workItemCountLimit="500">
<AddPanel>
<Fields>
<Field refname="System.Title" />
</Fields>
</AddPanel>
<Columns>
<Column width="400" refname="System.Title" />
<Column width="100" refname="System.State" />
<Column width="50" refname="Microsoft.VSTS.Scheduling.Effort" />
<Column width="200" refname="System.IterationPath" />
<Column width="200" refname="System.Tags" />
</Columns>
<States>
<State type="Proposed" value="New" />
<State type="Proposed" value="Approved" />
<State type="InProgress" value="Committed" />
<State type="Complete" value="Done" />
</States>
</RequirementBacklog>
<TaskBacklog category="Microsoft.TaskCategory" workItemCountLimit="500">
<AddPanel />
<Columns>
<Column width="50" refname="Microsoft.VSTS.Scheduling.Effort" />
<Column width="400" refname="System.Title" />
<Column width="100" refname="System.State" />
<Column width="100" refname="System.AssignedTo" />
<Column width="50" refname="Microsoft.VSTS.Scheduling.RemainingWork" />
</Columns>
<States>
<State type="Proposed" value="To Do" />
<State type="InProgress" value="In Progress" />
<State type="Complete" value="Done" />
</States>
</TaskBacklog>
<TypeFields>
<TypeField refname="Microsoft.VSTS.Common.Activity" type="Activity" />
<TypeField refname="Microsoft.VSTS.Common.BacklogPriority" type="Order" />
<TypeField refname="Microsoft.VSTS.Feedback.ApplicationLaunchInstructions" type="ApplicationLaunchInstructions" />
<TypeField refname="Microsoft.VSTS.Feedback.ApplicationStartInformation" type="ApplicationStartInformation" />
<TypeField refname="Microsoft.VSTS.Feedback.ApplicationType" type="ApplicationType">
<TypeFieldValues>
<TypeFieldValue type="ClientApp" value="Client application" />
<TypeFieldValue type="RemoteMachine" value="Remote machine" />
<TypeFieldValue type="WebApp" value="Web application" />
</TypeFieldValues>
</TypeField>
<TypeField refname="Microsoft.VSTS.Scheduling.Effort" type="Effort" />
<TypeField format="{0} h" refname="Microsoft.VSTS.Scheduling.RemainingWork" type="RemainingWork" />
<TypeField refname="System.AreaPath" type="Team" />
</TypeFields>
<Weekends>
<DayOfWeek>Sunday</DayOfWeek>
<DayOfWeek>Saturday</DayOfWeek>
</Weekends>
<Properties>
<Property name="BugsBehavior" value="Off" />
</Properties>
</ProjectProcessConfiguration>
I am new to the 2018 world and can't seem to solve this issue any suggestions would be helpful.
Adding my bug work item definition:
<?xml version="1.0" encoding="utf-8"?>
<witd:WITD application="Work item type editor" version="1.0" xmlns:witd="http://schemas.microsoft.com/VisualStudio/2008/workitemtracking/typedef">
<WORKITEMTYPE name="Bug">
<DESCRIPTION>Describes a divergence between required and actual behavior, and tracks the work done to correct the defect and verify the correction.</DESCRIPTION>
<FIELDS>
<FIELD name="Iteration Path" refname="System.IterationPath" type="TreePath" reportable="dimension" />
<FIELD name="Iteration ID" refname="System.IterationId" type="Integer" />
<FIELD name="External Link Count" refname="System.ExternalLinkCount" type="Integer" />
<FIELD name="Team Project" refname="System.TeamProject" type="String" reportable="dimension" />
<FIELD name="Hyperlink Count" refname="System.HyperLinkCount" type="Integer" />
<FIELD name="Attached File Count" refname="System.AttachedFileCount" type="Integer" />
<FIELD name="Node Name" refname="System.NodeName" type="String" />
<FIELD name="Area Path" refname="System.AreaPath" type="TreePath" reportable="dimension" />
<FIELD name="Revised Date" refname="System.RevisedDate" type="DateTime" reportable="detail" />
<FIELD name="Changed Date" refname="System.ChangedDate" type="DateTime" reportable="dimension" />
<FIELD name="ID" refname="System.Id" type="Integer" reportable="dimension" />
<FIELD name="Area ID" refname="System.AreaId" type="Integer" />
<FIELD name="Authorized As" refname="System.AuthorizedAs" type="String" syncnamechanges="true" />
<FIELD name="Title" refname="System.Title" type="String" reportable="dimension">
<REQUIRED />
</FIELD>
<FIELD name="State" refname="System.State" type="String" reportable="dimension" />
<FIELD name="Authorized Date" refname="System.AuthorizedDate" type="DateTime" />
<FIELD name="Watermark" refname="System.Watermark" type="Integer" />
<FIELD name="Rev" refname="System.Rev" type="Integer" reportable="dimension" />
<FIELD name="Changed By" refname="System.ChangedBy" type="String" syncnamechanges="true" reportable="dimension" />
<FIELD name="Reason" refname="System.Reason" type="String" reportable="dimension" />
<FIELD name="Assigned To" refname="System.AssignedTo" type="String" syncnamechanges="true" reportable="dimension">
<ALLOWEXISTINGVALUE />
<VALIDUSER />
</FIELD>
<FIELD name="Work Item Type" refname="System.WorkItemType" type="String" reportable="dimension" />
<FIELD name="Created Date" refname="System.CreatedDate" type="DateTime" reportable="dimension" />
<FIELD name="Created By" refname="System.CreatedBy" type="String" syncnamechanges="true" reportable="dimension" />
<FIELD name="Description" refname="System.Description" type="HTML" />
<FIELD name="History" refname="System.History" type="History" />
<FIELD name="Related Link Count" refname="System.RelatedLinkCount" type="Integer" />
<FIELD name="Tags" refname="System.Tags" type="PlainText" />
<FIELD name="Board Column" refname="System.BoardColumn" type="String" reportable="dimension" />
<FIELD name="Board Column Done" refname="System.BoardColumnDone" type="Boolean" reportable="dimension" />
<FIELD name="Board Lane" refname="System.BoardLane" type="String" reportable="dimension" />
<FIELD name="Remaining Work" refname="Microsoft.VSTS.Scheduling.RemainingWork" type="Double" reportable="measure" formula="sum" />
<FIELD name="Backlog Priority" refname="Microsoft.VSTS.Common.BacklogPriority" type="Double" reportable="detail" />
<FIELD name="Integration Build" refname="Microsoft.VSTS.Build.IntegrationBuild" type="String" reportable="dimension">
<SUGGESTEDVALUES expanditems="true">
<LISTITEM value="<None>" />
</SUGGESTEDVALUES>
<SUGGESTEDVALUES expanditems="true" filteritems="excludegroups">
<GLOBALLIST name="Builds - WHCRT" />
</SUGGESTEDVALUES>
</FIELD>
<FIELD name="Closed Date" refname="Microsoft.VSTS.Common.ClosedDate" type="DateTime" reportable="dimension">
<WHENNOTCHANGED field="System.State">
<READONLY />
</WHENNOTCHANGED>
</FIELD>
<FIELD name="System Info" refname="Microsoft.VSTS.TCM.SystemInfo" type="HTML" />
<FIELD name="Repro Steps" refname="Microsoft.VSTS.TCM.ReproSteps" type="HTML" />
<FIELD name="Effort" refname="Microsoft.VSTS.Scheduling.Effort" type="Double" reportable="measure" formula="sum" />
<FIELD name="Acceptance Criteria" refname="Microsoft.VSTS.Common.AcceptanceCriteria" type="HTML" />
<FIELD name="Severity" refname="Microsoft.VSTS.Common.Severity" type="String" reportable="dimension">
<ALLOWEDVALUES expanditems="true">
<LISTITEM value="1 - Critical" />
<LISTITEM value="2 - High" />
<LISTITEM value="3 - Medium" />
<LISTITEM value="4 - Low" />
</ALLOWEDVALUES>
<DEFAULT from="value" value="3 - Medium" />
</FIELD>
<FIELD name="Found In" refname="Microsoft.VSTS.Build.FoundIn" type="String" reportable="dimension">
<SUGGESTEDVALUES expanditems="true">
<LISTITEM value="<None>" />
</SUGGESTEDVALUES>
<SUGGESTEDVALUES expanditems="true" filteritems="excludegroups">
<GLOBALLIST name="Builds - WHCRT" />
</SUGGESTEDVALUES>
</FIELD>
</FIELDS>
<WORKFLOW>
<STATES>
<STATE value="Closed" />
<STATE value="In Progress" />
<STATE value="In-Progress - QA" />
<STATE value="New">
<FIELDS>
<FIELD refname="Microsoft.VSTS.Common.ClosedDate">
<EMPTY />
</FIELD>
</FIELDS>
</STATE>
<STATE value="QA Failed" />
<STATE value="Ready For QA" />
</STATES>
<TRANSITIONS>
<TRANSITION from="" to="New">
<REASONS>
<DEFAULTREASON value="New defect reported" />
<REASON value="Build Failure" />
</REASONS>
</TRANSITION>
<TRANSITION from="In-Progress - QA" to="QA Failed">
<REASONS>
<DEFAULTREASON value="Bug not resolved, see Notes" />
</REASONS>
<FIELDS>
<FIELD refname="System.AssignedTo">
<ALLOWEXISTINGVALUE />
<EMPTY />
</FIELD>
</FIELDS>
</TRANSITION>
<TRANSITION from="Ready For QA" to="In-Progress - QA">
<REASONS>
<DEFAULTREASON value="Testing Bug" />
</REASONS>
<FIELDS>
<FIELD refname="System.AssignedTo">
<COPY from="currentuser" />
</FIELD>
</FIELDS>
</TRANSITION>
<TRANSITION from="In-Progress - QA" to="Closed">
<REASONS>
<DEFAULTREASON value="Fix verified">
<FIELDS>
<FIELD refname="Microsoft.VSTS.Common.ClosedDate">
<COPY from="clock" />
</FIELD>
</FIELDS>
</DEFAULTREASON>
<REASON value="Confirmed not a bug">
<FIELDS>
<FIELD refname="Microsoft.VSTS.Common.ClosedDate">
<COPY from="clock" />
</FIELD>
</FIELDS>
</REASON>
</REASONS>
</TRANSITION>
<TRANSITION from="New" to="Closed">
<REASONS>
<DEFAULTREASON value="Not a Bug">
<FIELDS>
<FIELD refname="Microsoft.VSTS.Common.ClosedDate">
<COPY from="clock" />
</FIELD>
</FIELDS>
</DEFAULTREASON>
<REASON value="Old System - Closing bug">
<FIELDS>
<FIELD refname="Microsoft.VSTS.Common.ClosedDate">
<COPY from="clock" />
</FIELD>
</FIELDS>
</REASON>
<REASON value="Oops - Duplicate" />
</REASONS>
</TRANSITION>
<TRANSITION from="In-Progress - QA" to="Ready For QA">
<REASONS>
<DEFAULTREASON value="Unable to Test for now">
<FIELDS>
<FIELD refname="System.AssignedTo">
<ALLOWEXISTINGVALUE />
<EMPTY />
</FIELD>
</FIELDS>
</DEFAULTREASON>
</REASONS>
</TRANSITION>
<TRANSITION from="Closed" to="New">
<REASONS>
<DEFAULTREASON value="Re-Open Bug">
<FIELDS>
<FIELD refname="Microsoft.VSTS.Common.ClosedDate">
<EMPTY />
</FIELD>
</FIELDS>
</DEFAULTREASON>
</REASONS>
</TRANSITION>
<TRANSITION from="In Progress" to="Closed">
<REASONS>
<DEFAULTREASON value="Invalid Bug - Verified with Business">
<FIELDS>
<FIELD refname="Microsoft.VSTS.Common.ClosedDate">
<COPY from="clock" />
</FIELD>
</FIELDS>
</DEFAULTREASON>
</REASONS>
</TRANSITION>
<TRANSITION from="In Progress" to="New">
<REASONS>
<DEFAULTREASON value="Moved back to New">
<FIELDS>
<FIELD refname="System.AssignedTo">
<ALLOWEXISTINGVALUE />
<EMPTY />
</FIELD>
</FIELDS>
</DEFAULTREASON>
</REASONS>
</TRANSITION>
<TRANSITION from="New" to="In Progress">
<REASONS>
<DEFAULTREASON value="Dev working bug">
<FIELDS>
<FIELD refname="System.AssignedTo">
<COPY from="currentuser" />
</FIELD>
</FIELDS>
</DEFAULTREASON>
</REASONS>
</TRANSITION>
<TRANSITION from="QA Failed" to="In Progress">
<REASONS>
<DEFAULTREASON value="Dev working bug">
<FIELDS>
<FIELD refname="System.AssignedTo">
<COPY from="currentuser" />
</FIELD>
</FIELDS>
</DEFAULTREASON>
</REASONS>
</TRANSITION>
<TRANSITION from="In Progress" to="Ready For QA">
<REASONS>
<DEFAULTREASON value="Issue Fixed, Ready for QA" />
<REASON value="Can't Reproduce" />
<REASON value="Not a Bug, won't fix" />
</REASONS>
<FIELDS>
<FIELD refname="System.AssignedTo">
<ALLOWEXISTINGVALUE />
<EMPTY />
</FIELD>
</FIELDS>
</TRANSITION>
</TRANSITIONS>
</WORKFLOW>
<FORM>
<Layout HideControlBorders="true" HideReadOnlyEmptyFields="true">
<Group Margin="(4,0,0,0)">
<Column PercentWidth="100">
<Control FieldName="System.Title" Type="FieldControl" LabelPosition="Top" ControlFontSize="large" EmptyText="<Enter title here>" />
</Column>
</Group>
<Group Margin="(10,0,0,0)">
<Column PercentWidth="100">
<Control FieldName="System.IterationPath" Type="WorkItemClassificationControl" Label="Ite&ration" LabelPosition="Left" />
</Column>
</Group>
<Group Margin="(10,0,0,0)">
<Column PercentWidth="50">
<Group Label="Status">
<Column PercentWidth="100">
<Control FieldName="System.AssignedTo" Type="FieldControl" Label="Assi&gned To" LabelPosition="Left" />
<Control FieldName="System.State" Type="FieldControl" Label="Stat&e" LabelPosition="Left" />
<Control FieldName="System.Reason" Type="FieldControl" Label="Reason" LabelPosition="Left" />
</Column>
</Group>
</Column>
<Column PercentWidth="50">
<Group Label="Details">
<Column PercentWidth="100">
<Control FieldName="Microsoft.VSTS.Scheduling.Effort" Type="FieldControl" Label="Effort" LabelPosition="Left" />
<Control FieldName="Microsoft.VSTS.Scheduling.RemainingWork" Type="FieldControl" Label="Remaining Work" LabelPosition="Left" />
<Control FieldName="Microsoft.VSTS.Common.Severity" Type="FieldControl" Label="Severity" LabelPosition="Left" />
<Control FieldName="System.AreaPath" Type="WorkItemClassificationControl" Label="&Area" LabelPosition="Left" />
</Column>
</Group>
</Column>
</Group>
<Group>
<Column PercentWidth="50">
<TabGroup>
<Tab Label="Steps to Reproduce">
<Control FieldName="Microsoft.VSTS.TCM.ReproSteps" Type="HtmlFieldControl" Label="" LabelPosition="Top" Dock="Fill" MinimumSize="(100,200)" />
</Tab>
<Tab Label="System">
<Group Label="Build">
<Column PercentWidth="100">
<Control FieldName="Microsoft.VSTS.Build.FoundIn" Type="FieldControl" Label="Found In Build" LabelPosition="Left" />
<Control FieldName="Microsoft.VSTS.Build.IntegrationBuild" Type="FieldControl" Label="Integrated in Build" LabelPosition="Left" />
</Column>
</Group>
<Control FieldName="Microsoft.VSTS.TCM.SystemInfo" Type="HtmlFieldControl" Label="System Info" LabelPosition="Top" Dock="Fill" />
</Tab>
<Tab Label="Test Cases">
<Control Type="LinksControl" Label="" LabelPosition="Top" Name="TestedBy">
<LinksControlOptions>
<LinkColumns>
<LinkColumn RefName="System.Id" />
<LinkColumn RefName="System.WorkItemType" />
<LinkColumn RefName="System.Title" />
<LinkColumn RefName="System.AssignedTo" />
<LinkColumn RefName="System.State" />
</LinkColumns>
<WorkItemLinkFilters FilterType="include">
<Filter LinkType="Microsoft.VSTS.Common.TestedBy" FilterOn="forwardname" />
</WorkItemLinkFilters>
<ExternalLinkFilters FilterType="excludeAll" />
<WorkItemTypeFilters FilterType="include">
<Filter WorkItemType="Test Case" />
</WorkItemTypeFilters>
</LinksControlOptions>
</Control>
</Tab>
<Tab Label="Tasks">
<Control Type="LinksControl" Label="" LabelPosition="Top" Name="TaskLinks">
<LinksControlOptions>
<LinkColumns>
<LinkColumn RefName="System.Id" />
<LinkColumn RefName="System.WorkItemType" />
<LinkColumn RefName="System.Title" />
<LinkColumn RefName="System.AssignedTo" />
<LinkColumn RefName="System.State" />
</LinkColumns>
<WorkItemLinkFilters FilterType="include">
<Filter LinkType="System.LinkTypes.Hierarchy" FilterOn="forwardname" />
</WorkItemLinkFilters>
<ExternalLinkFilters FilterType="excludeAll" />
<WorkItemTypeFilters FilterType="include">
<Filter WorkItemType="Task" />
</WorkItemTypeFilters>
</LinksControlOptions>
</Control>
</Tab>
</TabGroup>
</Column>
<Column PercentWidth="50">
<TabGroup Margin="(5,0,0,0)">
<Tab Label="Acceptance Criteria">
<Control FieldName="Microsoft.VSTS.Common.AcceptanceCriteria" Type="HtmlFieldControl" Label="" LabelPosition="Top" Dock="Fill" MinimumSize="(100,200)" />
</Tab>
<Tab Label="History">
<Control FieldName="System.History" Type="WorkItemLogControl" Label="" LabelPosition="Top" Dock="Fill" />
</Tab>
<Tab Label="Links">
<Control Type="LinksControl" LabelPosition="Top" Name="GeneralLinks">
<LinksControlOptions>
<LinkColumns>
<LinkColumn RefName="System.Id" />
<LinkColumn RefName="System.WorkItemType" />
<LinkColumn RefName="System.Title" />
<LinkColumn RefName="System.AssignedTo" />
<LinkColumn RefName="System.State" />
<LinkColumn LinkAttribute="System.Links.Comment" />
</LinkColumns>
<WorkItemLinkFilters FilterType="includeAll" />
<ExternalLinkFilters FilterType="includeAll" />
<WorkItemTypeFilters FilterType="includeAll" />
</LinksControlOptions>
</Control>
</Tab>
<Tab Label="Attachments">
<Control Type="AttachmentsControl" LabelPosition="Top" />
</Tab>
</TabGroup>
</Column>
</Group>
</Layout>
<WebLayout ShowEmptyReadOnlyFields="false">
<SystemControls>
<Control Type="FieldControl" FieldName="System.Title" EmptyText="<Enter title here>" />
<Control Label="Ite&ration" Type="WorkItemClassificationControl" FieldName="System.IterationPath" />
<Control Label="Assi&gned To" Type="FieldControl" FieldName="System.AssignedTo" />
<Control Label="Stat&e" Type="FieldControl" FieldName="System.State" />
<Control Label="Reason" Type="FieldControl" FieldName="System.Reason" />
<Control Label="&Area" Type="WorkItemClassificationControl" FieldName="System.AreaPath" />
<Control Label="Links" Type="LinksControl" Name="Links" />
<Control Label="History" Type="WorkItemLogControl" FieldName="System.History" />
<Control Label="Attachments" Type="AttachmentsControl" Name="Attachments" />
</SystemControls>
<Page Label="Details" LayoutMode="FirstColumnWide">
<Section>
<Group Label="Steps to Reproduce">
<Control Type="HtmlFieldControl" FieldName="Microsoft.VSTS.TCM.ReproSteps" />
</Group>
<Group Label="System Info">
<Control Label="System Info" Type="HtmlFieldControl" FieldName="Microsoft.VSTS.TCM.SystemInfo" />
</Group>
<Group Label="Acceptance Criteria">
<Control Type="HtmlFieldControl" FieldName="Microsoft.VSTS.Common.AcceptanceCriteria" />
</Group>
</Section>
<Section>
<Group Label="Status">
<Control Label="Reason" Type="FieldControl" FieldName="System.Reason" />
</Group>
<Group Label="Build">
<Control Label="Found In Build" Type="FieldControl" FieldName="Microsoft.VSTS.Build.FoundIn" />
<Control Label="Integrated in Build" Type="FieldControl" FieldName="Microsoft.VSTS.Build.IntegrationBuild" />
</Group>
</Section>
<Section>
<Group Label="Development">
<Control Type="LinksControl" Name="Development">
<LinksControlOptions ViewMode="Dynamic" ZeroDataExperience="Development" ShowCallToAction="true">
<ListViewOptions GroupLinks="false"></ListViewOptions>
<LinkFilters>
<ExternalLinkFilter Type="Build" />
<ExternalLinkFilter Type="Integrated in build" />
<ExternalLinkFilter Type="Pull Request" />
<ExternalLinkFilter Type="Branch" />
<ExternalLinkFilter Type="Fixed in Commit" />
<ExternalLinkFilter Type="Fixed in Changeset" />
<ExternalLinkFilter Type="Source Code File" />
<ExternalLinkFilter Type="Found in build" />
</LinkFilters>
</LinksControlOptions>
</Control>
</Group>
<Group Label="Related Work">
<Control Type="LinksControl" Name="Related Work">
<LinksControlOptions>
<LinkFilters>
<WorkItemLinkFilter Type="System.LinkTypes.Duplicate-Reverse" />
<WorkItemLinkFilter Type="System.LinkTypes.Hierarchy-Reverse" />
<WorkItemLinkFilter Type="Microsoft.VSTS.Common.TestedBy-Forward" />
<WorkItemLinkFilter Type="Microsoft.VSTS.Common.TestedBy-Reverse" />
<WorkItemLinkFilter Type="System.LinkTypes.Hierarchy-Forward" />
<WorkItemLinkFilter Type="System.LinkTypes.Duplicate-Forward" />
<WorkItemLinkFilter Type="System.LinkTypes.Dependency" />
<WorkItemLinkFilter Type="System.LinkTypes.Related" />
</LinkFilters>
<Columns>
<Column Name="System.State" />
<Column Name="System.ChangedDate" />
<Column Name="System.Links.Comment" />
</Columns>
</LinksControlOptions>
</Control>
</Group>
<Group Label="Details">
<Control Label="Effort" Type="FieldControl" FieldName="Microsoft.VSTS.Scheduling.Effort" />
<Control Label="Remaining Work" Type="FieldControl" FieldName="Microsoft.VSTS.Scheduling.RemainingWork" />
<Control Label="Severity" Type="FieldControl" FieldName="Microsoft.VSTS.Common.Severity" />
</Group>
</Section>
</Page>
</WebLayout>
</FORM>
</WORKITEMTYPE>
</witd:WITD>

Answer 1

Did you do "enable new features" => In the config section (Projects) you can find this.
Also there is a guide from MS to your topic: https://learn.microsoft.com/en-us/vsts/work/customize/update-customized-process-template?view=tfs-2018

Answer 2

Try to add the following sample between <ProjectProcessConfiguration> </ProjectProcessConfiguration>
<BugWorkItems category="Microsoft.BugCategory" pluralName="Bugs" singularName="Bug">
<States>
<State type="Proposed" value="New" />
<State type="Proposed" value="Approved" />
<State type="InProgress" value="Committed" />
<State type="Complete" value="Done" />
</States>
</BugWorkItems>