To enter loan interest as a deduction from passive activity, do I create a new "passive interest" K-1, and choose activity type consistent with partnership income source?

yes, The interest expense is passive. You'll need to keep track because this interest expense reduces you tax basis in the partnership.

Thanks for the response. After submitting my question, I found a related forum question that helped solve the issue. It turns out that the place to enter "Interest Expense to Finance Purchase of Partnership Interest" is buried in an inappropriate place in the TT interview related to K-1s.  Under Describe the Partnership, one must check the box that says " I am required to pay supplemental business expenses on behalf of this partnership," even though the examples of such expenses are completely unrelated to loan interest. Select Yes on the Unreimbursed Partnership Expenses page, then click through several interview pages to one titled "Gifts, Education, and Publications." For some strange reason, the third item on this page is for the interest expense to purchase the partnership interest. This is not at all related to Gifts, education, and publications! I have informed TT of the need to improve the interview pages so that one finds this in a more straightforward manner.