It appears you are mixing up two very different tax concepts: Foreign Source Income (for your Federal Foreign Tax Credit) and U.S. Government Obligations (for your State Tax Return).
You would use the 80.68% This is handled when you report the 1099 DIV in a followup screen. After you enter the 1099 IDV and record the Foreign Tax Paid in Box 7, there will be a question that states tell us about your foreign dividends. Here the IRS is looking to find out how much of the dividend reported in Box 1A is foreign. If you do not know the exact amount, you will multiply the amount in Box 1A by 80.68%. The result is what you will record in that section, and this will transfer to your Form 1116 when you work on the foreign tax credit section.
All of the subtractions you mention are performed on the state return. You subtract nothing from the federal return. Under Oregon law (ORS 316.680), interest and dividends from U.S. government obligations that are exempt from state taxation under federal law can be subtracted from your federal taxable income to arrive at your Oregon taxable income. The formula is (Box 1A) minus (Box 2A) X US Gov %. You will need to find out from Vanguard what that percentage is, as it is based on your ticker symbol. You mentioned a table and perhaps that % is listed there.
Once you have this information, you can report the amount from the positive fund as a subtraction in your Oregon state return. It is in the section labeled Here's the income Oregon handles differently>other subtractions. Since your negative fund is zero, don't report this on your Oregon return.
You can also subtract foreign income tax in the other subtraction section. This is not handled like a credit but is a reduction of your Oregon State taxable income.
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