If that checkbox isn't ticked, then everyone who adds you to their contact list will be able to see your status, wether you add them to your contact list or not, only blocked people won't see your status or be able to message you.
If that checkbox is ticked, only people you can see in your contact list will be able to see your status or message you, still blocked people won't be able to see your status or message you.
Could you check if that checkbox is ticked?, under Tools > Options > Privacy