You're not missing anything. This can't be identified as an "uncommon situation" for Minnesota when entering your interest in the federal portion of the program, and there doesn't appear to be a way to create the necessary subtraction in the Minnesota part of the program.
Instead of overriding the information on Form M1M, you could achieve the same (state non-taxability) result by entering this interest in Box 3 of the Form 1099-INT you entered on the federal portion. Reporting-wise, though, that's not necessarily preferable to the override you're doing. The unaccounted for amount in Box 3 could raise eyebrows, but the override you performed shouldn't.
See Agencies Issuing Exempt Obligations on the U.S. Government Interest page for qualifying subtraction information.
