I am setting up my store and using variant inventory for colors and sizes in t-shirts with some items in stock and some back orders..

 It asks for status, ie: in stock, back order, etc...., but when I publish my item, it shows all of it as IN STOCK, when certain sizes or colors are marked as backorder or out of stock. I'm sure once I get my store up and running and start forwarding my current customers there, that we will make sales, but I am worried I will be selling items that are out of stock and wont be printed for weeks. Do I have to list inventory items as seperate items for the different statuses to work properly, or is there some setting I can apply so certain sizes or colors show up as out of stock or give a back order option?

There is currently an issue with the availability not properly updating when selecting different variant inventory items on the product pages. We should have it resolved soon. If you want to work around this display issue you could indeed create separate items for each combination, but the inventory settings should still work properly when going through the checkout process using variant inventory (out of stock items will not be able to be ordered, etc).

 Note that items with a "back order" status can still be ordered. You can control this using the back order checkbox on the product statuses page.