Is there a way I can create different customer statuses depending on the form selected? We have multiple departments with different sales cycles and I would like to go away from the one size fits all process for Leads and Prospects.

you can do that by using a workflow. If you elaborate a bit more about your business process context then can give better direction

Well right now, Leads & Prospects have their status as defined by the customer statuses list setup during initial implementation. This is a manual field dropdown that is changed by sales reps, and can also be affected automatically when creating an opportunity (changing it to prospect) and creating an estimate, or creating a sales order (changing it to customer). What I would like to see for Leads and Prospects is a separate form for ex: Residential and Commercial sales, that would be emblematic of their specific sales cycle.