Well, I don't think enough contradictions exist. To me, the overwhelming preponderance of evidence is in favor of the Federation being a state in its own right, and the few contradictions that do exist there can be rather easily reinterpreted. It's much easier to creatively reinterpret "Journey to Babel" than it is to reinterpret the five thousand other pieces of evidence for the Federation's out and out statehood, IMO.
Why treat it as a choice between two opposite extremes? There's always plenty of middle ground. We're talking about a political entity invented centuries in the future by members of multiple different species. Why does it have to fit into some pre-existing model from Terrestrial history? Why can't it be something new that embodies elements of both
a federal state and
a confederation of sovereign powers, but isn't exactly like either one?
If anything, I'd say that's inevitable. In SF, we tend to simplify the concept of a planet, to think of it as being a monolithic entity politically and culturally. Most SF planets have less cultural and ethnic diversity (and seemingly less territory, sometimes) than a single large city on Earth (or even a single New York borough). But think about it realistically. Think how many different states and cultures there are on a single planet and how hard it is to get them to work together. Even managing one planet as a unified state would require a political entity different from anything we've invented on Earth to date. It would have to be something that gave the planet's distinct cultures and nations enough autonomy that they'd be willing to cooperate in a unified system at all -- something that balanced the need for global unity with the need of each culture to retain its own identity and sense of self-sufficiency. Anything else would essentially be an empire and the individual cultures would rebel against it in time.
Heck, even the most successful empires in history have not been monolithic states, but have granted their conquered territories considerable political and cultural autonomy within their own borders so long as they provided the necessary tribute and resources to the imperial state. Historically, the successful governance of a large, multicultural political state requires
finding a comfortable balance between central authority and regional autonomy.
So when you multiply that to an interstellar alliance, it becomes even more complicated. The scale and complexity of such a system is unprecedented in human experience, and we simply cannot assume that any pre-existing Earth-based political paradigm can be transposed to it. On the one hand, there are so many different cultures and species involved that considerable cultural independence would be essential; yet on the other hand, the territory is so expansive that a strong central authority would be necessary or you wouldn't have any effective overall government at all. It's a paradox that no previously existing system on Earth could solve. Whatever system of government makes the Federation work, it's not the same as anything we know from past or present politics. It couldn't be. It must be more complex and exotic and have attributes that seem strange or contradictory to us.
Personally, I think the only way it could work is if it had a hierarchy of organizational tiers, from local to regional to national to continental to planetary to systemwide to interstellar. It makes sense to me that each planet could be simultaneously
a more-or-less sovereign political entity (at least where its internal affairs are concerned) and
a part of a larger metastate that manages external and interstellar affairs.
Another possibility, of course, is that perhaps Federation Councillors were originally styled "Ambassadors" because the Federation was originally intended to be a looser organization than it evolved into. Another possibility is that it was always intended to be a state, but one with a strong form of federalism, and that ergo the stylistic trappings of sovereign states were originally retained, in much the same way that, even today, you sometimes hear people refer to "the sovereign State of Ohio" or the "sovereign Commonwealth of Massachusetts."
Again, I don't think we can explain the Federation using historical precedents alone. And as Timo said, we can't assume that every term and title in a multispecies state centuries in the future would be used the same way that we use it in English today. To me, it makes sense to assume that "Ambassador" as used in the Federation is a term that encompasses both the current meaning of the term and something closer to "Councillor." Since individual worlds would still have considerable local autonomy, the Federation Council would be as much an IGO-type forum for allowing individual worlds to work out their disputes as it would be a federal legislature for dealing with issues of broader concern.
And yes, I recall the arguments for why the Federation can't be an IGO in the sense the term is used today. Which is why I said IGO-type. Again, we're talking about something more complex than any present Earth-based system, something that embodies elements of multiple different such systems on different tiers of organization. So it functions like an IGO on one tier (the tier of planet-to-planet relations) and a singular state on another tier (the tier of relations between interstellar powers).
Seems to me that the logical conclusion is that the Federation is a state, as we understand a state, in its own right -- albeit one with far greater commitment to local government's rights and autonomies than we oftentimes find in real-life federations.
Err, I think that's pretty close to what I've been arguing all along. I never said it wasn't a state, just that it was a different kind of state than we have experience with on Earth.