I sort of like the idea of Senators being chosen by the state government, but I honestly don't see a HUGE difference in theory. Senators (and Congressmen for that matter) are still being chosen exclusively by residents of their state, it's just a matter of whether they're chosen directly or indirectly.
I think what hurts a state far more is the lock the two major parties have on the voting of their members, particularly the Republicans. Pretty much nobody strays from the party line, and if they do, they're punished for it (to the point of losing their seat to a primary challenge, as has happened more than once). Doing what's right for your state isn't really an option when the enforced expectation is that you'll vote the party line.