RESOLVED.
Update to others that might have this problem. I've worked with foilman the last few days to resolve this. It seems to be an out of sync problem with his database of customers and their orders. He imported his customer database but something isn't lining up correctly with the customer IDs so its not able to properly massage the address data for the state code when they place an order. This leaves the state as "IL" instead of auto converting it to "Illinois", "GA" instead of "Georgia", etc.
Be sure that you are importing things carefully.
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