Not true. The State has complete authority over the entire State including all cities and villages. Any authority the village has comes only by being granted/allowed by the State. States will have laws and/or constitutional provisions that specify what a local government can regulate in general as well as what they can more restrictively regulate than State law. Many times State laws/regulations cannot be overuled or further restricted by a local government.State law won't override local codes adoption and the language therein, so don't spin your wheels on that.
Phospher, Call your State Electrical office and ask them whether a village can prevent a HO from doing their own electrical work. Try to get the actual law or code reference from them so you can present it to the local inspector.
BTW, the only way an inspector can legally enter the home you live in is with a court issued warrant or by your permisssion. And he cannot use the fruits of an illegal search against you. However, you should always get the required permits/inspections.