Take a look at the infamous Material/Shader implmentation thread if you have not already. There are also quite a few threads that bring up some questions regarding some of the points that's discussed in the aforementioned thread which you can find using the search feature. Anyway, that thread is somehow outdated and I'd argue that there are more flexible ways to implement such a system in 2008.

For one thing, I strongly advise you to leverage the power of effects* instead of the lower-level shaders since the former allows all pipeline configurations to be set inside one file so there's no need to have distinct State objects. Not only is it simpler to use, but it also makes a one-man team more productive. I can hardly imagine how separate shaders can be superior in any way.

Having said that, if you're really planning to overlook all the benefits of an effect framework and go down the shader route, take a look at XEngine's documentations as a guiding example of how this can be done.

* Microsoft HLSL effect framework if you're planning to target Direct3D only or NVIDIA CgFX if you're looking for an API-agnostic solution