So this compromise proposal is being floated ... to implement a national public option but allow the states to opt out either by legislative action or public referendum.
Personally, I like the proposal a lot. It looks likely to avoid the crippling that the various other public option proposals have suffered and it makes use of the federalist idea of the states as laboratories.
If the public option is as bad as the right seems to think, it will quickly disappear as more and more states opt out. If it works well, it will flourish as those states which originally opted out decide to opt in.