I have also tried to use the external content type connector and list lookup, but since it's an external list list lookup doesn't work and the external content type doesn't allow me to filter based on the criteria.
I tried creating panels and disabling until something else was filled out, but that also doesn't work. User wants real time data, so workflow is not an option. This is easily achieved in InfoPath
Cascading on the SQL control isn't yet available out of the box, but it's a feature that has been mentioned in the past to be coming in the not too distant future.
How it works:
User fills the data in the form and triggers the search. Then my webservice calls SQL procedure and retireves data array in JSON back to the form and then i parse that data and pre-populate the dropdown field.