Yeah, Windchill can really be a bxxx-buster at times.
The way you have to look at it is this. (I also didn't include a little nugget)
You pick on the state at the top. The gray and yellow boxes.
Then below in the Transitions tab it shows the same states. You basically have to say:
What will I allow the object to do when going from the current state (above) to the target state (transition tab)?
So to lock it I select the In Work state above then check the box for Lock in the Under Review column. It goes from In Work (where the users have modify rights) to the Under Review Locked state.
To take that a bit further as you can see we have allowed our users to set the state from In Work to any one of three other states: Concept, Prototype In work or Pilot In Work.