Cathi,
>other industry experts about this. There definitely is a consensus to only use SQL Server if the needs of the application demand it. Otherwise, using state server is considered best practice.Since, when using state server, everything is stored in RAM, I can see where it would be better performance-wise if you're not persisting a large amount of information. That said, I can also see where that might fall apart pretty quickly with either large amounts of data or heavy traffic, the limitation being the amount of RAM available. The SQL Server option definitely has greater scalablity.
But, the cool thing about this is that you could start off using a state server and very easily switch to using SQL Server if things needed to be scaled up. It's simply a matter of changing a config file and running a SQL script that generates the necessary stuff on your SQL Server and you're done. QED =)
~~Bonnie