What goes in the main page for a namespace? Should it be a normal page, i.e. www.domain.com/index.php/Illinois or shout it be www.domain.com/index.php/Illinois:Main_Page?
Up to you. Something predictably consistent across your whole wiki is best for usability.
Do all pages in the namespace have to be defined as Illinois:mypage? I am assuming that for now.
That's the sensible user friendly approach.
Is there a way to have a page in multiple namespaces?
Templates
i.e.say I have Chicago Illinois which is under Illinois:Chicago. But, Chicago has a group that wants to make Chicago look different so it becomes its own namespace so I can do a skin for it. How would I handle that since it needs its own namespace, yet it is still apart of Illinois?
Instead of unnecesary namespace complexity, why not keep most pages in a main flat namespace? Simplicity is the key to maintainability. You may be interested in studying how Wikitravel.org is organized. Note their flat namespace -- the whole Earth fits into the main namespace. It is after all one World. Subpages are kept to a minimum but used to divide large city pages into districts.
Geographical bread crumbs are another interesting feature on Wikitravel.org. http://wikitravel.org/en/Wikitravel:Breadcrumb_navigation
Per namespace skins? Such complexity may do a project more harm than good over time.
Happy trails,
Roger