I need some advice. Lets say I wanted to have a website that allows users to buy a fishing license from any state. Call it FishingLicenses.com, for example.

1.) First, assuming each state has an on-line solution that allows people to buy a license on-line, is it legal for me to create a proxy site that collects user information and basically passes it through to the State's website to processes the transaction. My incentive would be to generate ad revenue.

Here's an example of a state's website:

https://secure01.virginiainteractive...fh_license.cgi

2.) Second is it even possible to create an interface when the State website has buttons, comboboxes, radio buttons, etc? So what I envision for example, is to create an interface for each state that mimics the inputs needed for that state.

No idea on if it's legitimate or legal, but all you would need to do is to open the page in a frame or full page iframe.

To find out if it is legal or not, you would have to check each state's Terms of Service on their site. If they don't exclude it, you should be fine running the CGI, but often times, sites will restrict users from filling out the forms for other users, or proxying the site.