I think you actually underestimate the complexities here. The problem isn't number of people -- you're correct, many states are as large as European countries. However, the states don't have nearly as much self-governing power (as granted by the Constitution) as European countries. In things like healthcare, this makes a big difference. For example, one of the biggest benefits to the federal government is that it can temporarily run a budget deficit during hard times. There are innumerable times (including now) when that would be necessary for a large swath of public services. It would require a rather huge change in federal law in order to make this work on the state level. Another problem you would get is massive problems with the full-faith-and-credit clause. All in all, it may be worth considering that, accounting for modern high-speed transportation and intercommunication and trade, strong states may be an antiquated idea.
Right now, for better or worse, our government is more liberal than our population
That's difficult to argue. Notably, consider that one person's vote in Wyoming counts 67 times more than a Californian's in the US Senate and 1.264 times a Californian's in the House of Representatives.