New York forbids coasting. Here is the rule:
§ 1216. Coasting prohibited. The driver of any motor vehicle when
traveling upon a down grade shall not coast with the gears of such
vehicle in neutral, nor with the clutch disengaged.
When I read about a reason not to coast, it is usually about avoiding brake failure due to overheating. Of course, any smart driver would stop coasting before using the brakes when descending a steep hill except when sudden braking is needed for an unexpected hazard. I've also read that the brakes on cars were much weaker when the laws against coasting were written. The law seems to be there to protect bad drivers who don't know when it would be appropriate to stop coasting.
Apparently, it is permissible to coast when slowing down on level ground or up a hill, just not on a down grade.
Here is an interesting article about coasting laws.
AARP.org Member ronburley's Journals: Watch, Post, Comment, and Share with Friends
I found something that says the new 2009 VW Touareg Hybrid automatically coasts when the driver removes his foot from the gas pedal.
Green Car Congress: Volkswagen Introduces BlueMotionTechnologies Umbrella Brand for Fuel-Efficient, Low-Emissions Technologies; Previews Touareg Hybrid