I had the same question, and the same sense that the IRS did not identify the box and the same hope that the interest would be free from state taxation. I can't say I've found a definitive answer, *but* I did find a discussion from the Pennsylvania Department of Revenue.
https://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Pages/Interest.aspx
In that discussion, Pennsylvania takes the position that this is an "open account" and is therefore not the kind of fixed obligation that would be exempt from state tax. I can see contrary arguments in theory (for instance, Savings Bonds can be cashed in at any time so they are not really "fixed" the way a Treasury Bond is fixed), but I'm assuming that Pennsylvania didn't make this up.
Massachusetts has a similar conclusion: https://www.mass.gov/letter-ruling/letter-ruling-81-12-interest-on-federal-tax-refund
So unless someone can find another source that explains the difference between open accounts and fixed obligations in a way that supports Box 3 treatment, I suspect that a sophisticated tax lawyer (which I ain't) would tell us that it should be Box 1.
