<p>OK, first let me state that I have never used this control and this is also my first attempt at using a web service.</p>

<p>My dilemma is as follows. I need to query a database to get back a certain column and use that for my autocomplete. Obviously I don't want the query to run every time a user types another word in the textbox, so my best guess is to run the query once then use that dataset, array, list or whatever to then filter for the autocomplete extender... </p>

<p>I am kinda lost any suggestions??</p>

This question depends upon how transactional your data store is. Obviously if you are looking for US states (a data collection that would not change realistically through the life of the application) then I would either cache a System.Collection.Generic List<> type or if you wanted a DataTable.
You could easily set up a cache of the data you wish to query to be dependent upon an XML file or database so that your extender always queries the data object casted from the cache and the cache object is only updated when the datasource changes.