Part way through entering my return, and it is showing a very large State refund (more than we have paid in witholding). What could cause this error?

This might not be an error.

It is difficult to say without seeing your return or knowing what state you are filing in, but some states have refundable credits.

These are credits that if you qualify, will add to your refund over and above your withholding in the right situations.

If you have the Online product, navigate to the state interview, then click on Tax Tools on the left, then click on Tools right below it, then click on View Tax Summary in the center. See if there is enough detail to determine that your credits plus your withholding are larger than the assessed taxes.

If you have the CD/download product, just go to Forms (upper right) and scroll down on the left until you see your state's main tax return and click on it.