Is it acceptable to make new independent variables out of old ones?
It is completely acceptable if you make out new categories out of old ones or add a different representation of them like in the case of (North East, Midwest, South, Etc.) from state this process is called feature engineering. All you need to pay attention to is that you are not loosing any information in any way when you are doing so because you want to feed your model with as much information as possible. 

Sometimes it is useful to keep both the new variable you made out of other variables like for say you have a dataset containing infect_people_from_covid19 in region and population_of_region you can create a variable as ration of people infected but when building a model and feeding data you have to decide weather adding all 3 of them will be a good idea or you just need the summary variable you made.