I don' have an experience in sqldatasource. but i will give an idea.
Here you are getting the error "object reference not set to instance of an object"
that means you are trying to access an object whose value is null.
here , "SqlDataSource1.SelectParameters("state")" is returning "null" . so it is giving this error.
try this, SqlDataSource1.SelectParameters("@state") instead of SqlDataSource1.SelectParameters("state")
still if it is not giving the results. debug it. set a break point there,
check the values of "sqldatasource1.selectparameters" ---------> it will show the parameter collection, show that properties, it will show the count of those parameters and values in that collection. see those. you will get an idea.