Take a look at the court challenge,
Immigration Reform Coalition of Texas v. State of Texas (University of Houston), and why it is felt that the Texas law violates the IIRIRA of 1996.
It is obvious that the Texas law was written to circumvent federal law. By just using a residency requirement and not mentioning "illegal alien" or the legal status of those receiving the benefit, then any citizen from another state could qualify using the residency requirement.
I think you may have meant to link to a different decision. What you linked to was a Federal District Court Memo and Order that granted IRCOT's motion to remand the case OUT of federal court (where the state of Texas wanted to litigate), back to Texas Courts. The memo indicates removal is appropriate, in part because IRCOT lacks (federal) constitutional standing.
That was back in April, 2010, and the legal situation has no doubt developed since then.