In the checkout form, remove the onBlur event from the phone number field:
onblur="WAValidatePN(document.getElementById('CheckoutWizard_Cool101_Default').Phone_Number,'',false,true,' xxxxxxxxxxx',document.getElementById('CheckoutWizard_Cool101_Default').Phone_Number,0,true);MM_validateForm('Phone_Number','','R');return document.MM_returnValue"
The state field cannot be removed, it is needed to fill in the form even if it is left blank.