I recently found a small bug in the SharePoint 2010 PowerShell comlets for creating the state service database using “New-SPStateServiceDatabase”.
You will receive the rather unhelpful error message “Operation is not valid due to the current state of the object”. I believe this is a generic WCF error as that’s all I was able to find when researching what may cause the problem. However, it later transpired that this was because I was trying to use a database alias (or potentially database server) which SharePoint isn’t currently aware of, as using the alias (or database server) that was used for the initial farm setup didn’t result in the same issue.
Its taken me a while to find this one as the state service isn’t usually one of the first service applications I configure, so it appears most of the other service application creation cmdlets don’t mind registering a new database host, but for some reason this one does!
If you use sql alias (as a best practice you should) and have a different alias for service applications, I would advise creating another service application before creating the state service database in order to make sure SharePoint is aware of the alias/dbserver.