So, this has almost nothing to do with actually teaching the states and capitals, but I had my fourth graders participate in "The Great Mail Race." (Information here:
http://thegreatmailrace.weebly.com/index.html)
I thought about doing this with my first graders this year, but I got too overwhelmed with being in a new school, grade, district, and state all at once. Haha!
I suppose you could modify it and only write letters to a school within the capital city... I don't know. Lol
Good luck.