Select rows from table 1, table 2, then selecting based on ID
While you already seem to have resolved the problem to your satisfaction, the classical solution to this is to use a FULL OUTER JOIN:

SELECT COALESCE(t1.State, t2.State) as State
      ,COALESCE(t1.ID, t2.ID) as ID
      ,COALESCE(t1.Conditional_Value, t2.Conditional_Value) as Conditional_Value 
  FROM Table1 t1
         FULL OUTER JOIN Table2 t2 ON (    t1.State = t2.State
                                       AND t1.ID = t2.ID)


Note: code untested, and I haven't worked with teradata specifically, so there may be some syntax issues I can't predict. However, the basic commands and functions should be correct, from what I can see.

The code merges the two tables based on the State and ID values. The COALESCE functions ensure that whichever table has a value for a particular row, that's the value that will be used. Since we look at Table1 first, if both Table1 and Table2 have a value for Conditional_Value, the value from Table1 will be used.