Previously I left my employer in December and began working the next year internationally (entire year, no US income). Since I had a 401k loan it was reported as a distribution but not until Februrary of the subsequent year. What tax implications will this have since my income is below the foreign income exclusion? Granted I will have to pay a 10% penalty for early withdrawl and list this as income. Will that income be reportable to Federal and NY state even though I lived abroad the entire year?

Yes, the income IS considered to be U.S.-based income subject to both federal and NY state income taxes.

NY state taxes also? Even though I did not reside one day in NY state?

No, it is reportable in the state whewre you DID reside, which is probably NJ or PA.

I did not live in any state in 2006, lived in another country the entire year. Well except for a couple short vacation trips back home to the states, less than 20 days.

Be prepared to PROVE to some state that you did not live in their state in 2006. The proof would be documentation that shows you established domicile in the foreign country you cite.