This problem was happening with me too (Ubuntu 10.04). In empathy there
was 2 accounts actived: my msn account and a account for local
messaging.

When I disabled the local messaging and let just the msn account active
now when I set invisible, appear invisible in Indicator Applet Session.
Before I do that the Indicator Applet Session appeared as Busy when I
changed my status in Empathy for invisible. However my real status in
msn for other contacts I was offline, I think that appeared busy because
local messaging don't have support for Invisible.

Sorry for my english, I'm just trying to help.

-- 
Setting status to 'Hidden' changes status to 'Busy' instead
https://bugs.launchpad.net/bugs/257190
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