O'Reilly doesn't grasp concept of Federalism

In his talking points memo to be read tonight, he says in response to the NY State judge who declared that the NY DMV cannot revoke driver's licenses based on immigration status:

• Tomorrow, President Bush should call New York Senators Schumer and Clinton into the Oval Office and tell them that if New York State refuses to enforce the Real I.D. Act it will forfeit all federal highway money, period. States cannot continue to defy federal law, period.

But wait, I thought that during the Schiavo matter we were told that the State judiciary has the power to interpret State law and that the legislative and executive branches are powerless to overrule the judiciary.

If neither George nor Jeb Bush couldn't step in and override federal or State courts in that case, how can do the same now?