Yes, image widgets are ideal for indicating the status of signals. This is even better than drawing primitive circles – you can draw sketchy or realistic images of indicators. You can change the picture of the image widget at any time, as well as hide or show it again.
In my project, this is exactly how I do the indication of the status of sensors and actuators. For example, for a solenoid valve, I have 4 possible display states: inactive, off, on, and alarm. For a motorized 3-position ball valve, there are even more states: inactive, each of the 3 possible end positions, intermediate position and alarm. All this is perfectly implemented by the image widget 🙂