Hi Again, AWC
Thanks for coming back with such complete information. I've re-set this thread as an on-going discussion, so hopefully that will stick and the topic can keep going. I agree, you should get 2nd and 3rd opinions on this, and I'm going to ask one of our traditional SEOs to step in as well with an opinion from that viewpoint of expertise.
My opinion is this: by putting local information on your product pages site-wide, you are sending a very pointed signal to Google that you deem your data to be most relevant to Oklahoma residents. If you're including the city as well as the state in all tags and text, you are sending a further signal that you consider your data to be most relevant to your own community within the state. Now, whether Google abides by the signals you have sent or not is where the grey area lies.
You are selling items out of state, as you say, but you've got them all, in a sense, labeled, as Oklahoma products. A truly national site wouldn't really take that approach with its SEO. And yet, there was real sense in your approach to start out small to get business locally because that cut your competition for product keywords down considerably. What you did makes perfect sense to me.
Now, with your question as to whether so boldly labeling everything on your site with state or city/state labels is going to be a detriment to you attempting to rank beyond state borders for the product, I honestly don't know. My gut feeling can be summed up in my observation that a national SEO campaign would not include those geo terms. That being said, Local and traditional SEO do not cross one another out. If going national is now your focus, you could trim back the heavy usage of city-related terms, and stick to spelling out your city in your footer site wide, on your contact page, about us page, home page and maybe a few other pages that talk about the ability for customers to do business with you in person. And, of course, you can list the local business in Google Places, Bing Local and all of the other relevant local business indexes.
State-related terms (Oklahoma) are not local, so that needs to be treated more as you would traditional SEO. You need to determine whether potentially losing some dominance for phrases that include the 'oklahoma' in them will be worth making the site look more truly national, in terms of its SEO. I haven't done any keyword research, but I'm doubting a ton of people are searching for 'barn kits oklahoma' or similar terms. My feeling is that they would either be trying to find one locally (in which case they would include the city name in their query) or that they would be comparison shopping on-line.
Bottom line: I think the decision rests with you as to whether your main SEO thrust needs to be truly local (city+state), statewide (in which case you'd keep optimizing everything with the state name) or truly national, in which case, you don't really want geographic modifiers all over the tags and text. You know your customer base and can look at your books to see what percentage of your business is coming from where (local vs. state vs. national). In situations like these, that is the best metric I can provide to help someone discern where their main efforts need to be placed.
Let's see what our traditional SEOs have to say! Sit tight.