Thanks for the reply.
The problem with the updating workflow is we might have to change the assignee for the waiting state in the workflow. (Without changing the assignee, I am not sure how to notify the person that we put waiting on or how that person will list all tasks waiting on his/her)
Was able to use "Add Field" option under the admin to add a waiting field which can be set to a user. Was able to create a JQL filter that lists the tasks that are currently waiting for the current user. The only issue with that approach is everytime a new task is created, have to add a field manually.
Problem with that approach is you now have something that is "in progress", but not in progress, but waiting, at the same time.
Waiting is a natural status, not a dual one done with an extra field, and changing the assignee to who needs to attend to it is the best option.
I would automate this - have a "previous assignee" field. When someone puts an issue into waiting, copy the current assignee into it, and force the person putting it into waiting to choose a new assignee. Then copy it back to assignee when the person moves it back out of waiting. You'll need some add-ons to do that.
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