Learn Spanish (Latin America): El estado del edificio es malo.

This is a classic trap! While we normally use estar to talk about the temporary state of a thing, here the subject of the sentence is the word estado (condition) itself. We are defining what the condition is (a bad one). To describe the core characteristic of a noun, even if that noun is the word 'condition', we use ser.

How would I rephrase this sentence to use estar, fitting with this lesson's focus on states?

You would make the building the subject of the sentence, rather than the condition. You would say, El edificio está en mal estado (The building is in a bad state). In that case, you use estar because you are describing the resulting state the building is currently in.

Why is the word for bad here malo and not mal?

Malo is an adjective describing the masculine noun estado. It only drops the 'o' to become mal when it is placed directly before a masculine singular noun (for example, un mal estado). Because it comes after the verb here as a descriptive characteristic, it stays as malo.

Does estado always mean 'condition'?