As a follow-up to the TFS Work Item Tracking presentation I gave last night at IndyTFS, I want to provide some tips for getting started with editing work item types in TFS.
First and foremost, make sure you have downloaded and installed the latest Team Foundation Power Tools. The Process Template Editor is included in that tool set. The downloads and instructions for TFS 2005 are slightly different from those of TFS 2008. So I'll cover those separately below.
Version 2005
To download and install the Power Tools:
1. Download the 2005 Power Tools here. Note that you first need to install the DSL tools redistributable; just look further down on the page for its download
2. Install the DSL tools redistributable first, then the Power Tools itself
Once the Power Tools are installed:
1. Open the TFS client (i.e. Visual Studio 2005)
2. Make sure you have the Team Explorer window showing and a Team Project selected
3. Select Process Editor from the Team menu

4. Select Work Item Types -> Open WIT from Server

5. Enter the name of your TFS server in the dialog that pops up

6. In the next dialog, find and select the Work Item Type you want to edit
7. Click OK
At this point you are ready to edit and save the Work Item Type. Remember that saving it to the TFS server will immediately affect all users using that particular Work Item Type - so be careful!! Read below for some quick pointers on editing the Work Item Type.
Version 2008
To download and install the Power Tools:
1. Download the 2008 Power Tools here
2. Install the Power Tools
Once the Power Tools are installed:
1. Open the TFS client (i.e. Visual Studio 2008)
2. Make sure you have the Team Explorer window showing and a Team Project selected
3. Select Process Editor from the Tools menu (yes, they moved it from the Team menu to the Tools menu in going to 2008)
4. Select Work Item Types -> Open WIT from Server
5. Enter the name of your TFS server in the dialog that pops up (if it pops up)

6. In the next dialog, find and select the Work Item Type you want to edit
7. Click OK
At this point you are ready to edit and save the Work Item Type. Remember that saving it to the TFS server will immediately affect all users using that particular Work Item Type - so be careful!! Read below for some quick pointers on editing the Work Item Type.
Tips to edit your Work Item Type
This section simply throws out some simple tips for making changes to the Work Item Type. It is important to understand that the Work Item tracking capability within TFS, and the power of using the Process Editor to alter your development workflow, goes far beyond these few tips.
Making a field required - all the time
To make a field required, regardless of state or transition, open the field on the Fields tab. Then click the Rules tab on the Fields Definition dialog. Click the Add button to add a new rule. Then select the REQUIRED rule type. Click Ok. When the dialog pops up that prompts you to enter the "FOR" and "NOT FOR" permissions, just click OK. Click OK again to finish editing the field.
Making a field required - only when transitioning to a certain state
To make a field required when moving from state A to state B, you need to edit the field from within the Workflow designer. So first select the Workflow tab in the Work Item Type editor. Then looking at the visual workflow diagram, find the state on which you want to make a field required. For example, if you want to make the "Assigned To" required when moving a work item from Active to Resolved, find the little blue transition element that has a dot on the Active state, and an arrow on the Resolved state. Right-click on it, and select Open Details. On the dialog tha tpops up, select the Fields tab. If the fields you want to add the REQUIRED rule to is not already in the list, click the Add button. Otherwise, select the field and click the Open button. On the first tab of the Field Reference dialog, select your desired field from the dropdown. Then click the Rules tab, and click the Add button. This will pop the dialog allowing you to select your desired rule - in this example, the REQUIRED rule. Click Ok a few times, and now your field is required only in the given transition.
Adding dropdown list options to a field
Sometimes you have a text field, and you want to provide a list of options to the user. So, assuming you already have a text field on which you want to add or update a list, select the field form the Fields tab and click the open button. Then click on the Rules tab. Click the Add button. This time, instead of REQUIRED, we're going to select the ALLOWEDVALUES rule. After clicking OK, you are presented with a dialog that allows you to enter a list of strings for the dropdown options. Use the Add button, entering the option value and clicking OK, as many times as needed. Then click OK a few times. Your field will now be shown with a dropdown list of options.
More Information
To really learn how to edit Work Item Types, and also how to edit and create your own complete process templates, read the PEUserGuide Word document found in the "C:\Program Files\Microsoft Team Foundation Server Power Tools\Process Template Editor" after you install the 2005 Power Tools, and "C:\Program Files\Microsoft Team Foundation Server 2008 Power Tools\Process Template Editor" after you install the 2008 version of the Power Tools.
You can also find lots of information on utilizing the TFS Process Templates here. This site does a great job covering all the facets of implementing TFS Process Templates, and using the Power Tools to help you along the way. You will also find links to other process templates in the community - some free, and some not.