This has not been observed on my end, but I have two thoughts.
First, it sounds as if you are manually setting the missing flag. I have mine set up to automatically set it (Settings menu in Grades). When I enter a grade for someone who is marked missing, it automatically updates to Late. I'm not sure if this behavior is consistent when the flag is set manually.
Second, when you say the status is not being removed, are you referring to Canvas or your SIS? We use PowerSchool. The missing flag status updates correctly in Canvas, but will not update correctly in PowerSchool. Even when the grade sync sends the grade to PowerSchool, the missing flag remains on PowerSchool until I manually remove it.