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Hey Jeff - Saw this question a few days back and decided not to chime in, but since no one has responded I'll throw in my two cents.
Let me summarize the problem as I understand it. If you use Marketo's Inferred State data and use a smart campaign to put Inferred State into the State field, it won't work with Progressive Profiling because the fact that the field has any data means it is no longer eligible for profiling.
As I said 3 years ago on the "similar discussion" thread I find the IP lookup to determine city, state, country to be fairly accurate. But no database will be 100% accurate, so you'd like to give the user the ability to change the value to something different if it is inaccurate. That's what you mean by "Dynamic State" correct? That you want it to pre-fill with what the system thinks it is, but allow a user to override it if it isn't correct.
The only real thing I can think is to make the field always shown, but always having State on every form after the data is validated is really strange.
All in all, i don't see a great answer. If you want the data, it can be verified but it can't be progressive. It seems you should accept the data, or not. One lingering thought is that in the very long days of Summit 13, I seem to remember Eric Hollebone discussing it during his talk. You might look up his summit talk to learn more.
Thanks for the response. I will try to do some more digging like you suggested.
In response to your original question, this is a feature I have been wanting to implement as well for a long time. I just did some testing on the basic forms (which are all over my site and integrated into everything) and it did NOT work. I have been told by Marketo that is does work in forms 2.0. I have not tested it out yet as it will also mean I would pretty much have to re-do my entire form infrastructure to implement.
Any progress or lessons learned on your end?