The first part of your question, whether you enter the $1,000 tax exempt EIDL advance loan on Schedule M-1 worksheet or Schedule K, Line 16b, it will be still non-taxable income for you, although entering it on Schedule M-1 is technically correct way.
As for the second part of your question, despite the EIDL was paid by federals, it went though you state, and you need to enter there name of your state.
