Build static library
I see that you accepted the answer, but I thought I'd leave a note for future library developers. After upgrading an Xcode 3.x based static library project to 4.x, the library will not always upgrade and begin doing universal library builds. When this happens, the project build will be successful and apps linked against the target dependency will run fine, but you'll get red static library files showing in the projects you pull in. This is very annoying and the only fix I have found is to recreate the project files -- I tried auditing the build settings but was unable to figure out the confounding factors.
Hope this helps save somebody the 2 hours I just lost :-P