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From a strict A/B standpoint where the two variables are: www.domain.com/california www.domain.com/state/california You will see no discernible difference in SEO results. That being said, if you plan to expand the URLs later, i.e. www.domain.com/state/california/santa-monica/our-service-keywords.* then you should probably consider what length they will be and factor that into your decision.

Update: I used ISAPI_Rewrite from http://www.helicontech.com/ to handle domain alias redirects and it uses proper 301 redirects to the primary domain. Also I found an article in the Google Analytics Forum Archive http://groups.google.com/group/analytics-help-basics/browse_thread/thread/380a839ebd9a7f6a which answered my other question on finding the count of referrals to the primary domain from the alias domains. Apparently it's very simple and their is no setup needed. Just go to Visitors -> Network Properties -> Hostnames for your site's profile in GA.