Hello,
We checked and this is an issue. After approving the Refund, the transaction is not creating. We have added this to our pipeline for the fix.
However, the return/exchange is working. After enabling the RMA options, you can set the no. of the return/exchange days. After delivery user/admin can apply for return/exchange. Admin can approve.
If you want to use refund order status, set the next order status Refund after the return/exchange approved. You can do that from the Settings > Statuses.
I hope this helps.
Thank You