In 2004 neither Kerry, nor Edwards contested Vermont even though Howard Dean had already dropped out.
As
Wikipedia (not always right but jibes with my memory) notes, Dean's victory in VT was actually a surprise. Most people thought it would go to Kerry (Edwards didn't bother to file there). There are actually a number of examples of candidates contesting their opponents' home states: Reagan '76 in MI, Reagan '80 in TX (he won it), Clinton '92 in CA (another win), Bush '00 and to a lesser extent Romney '08 in AZ. There was also that Rick Santorum guy who tried to win Romney's birth state some weeks back.