Michigan taxes their residents on all their income, no matter where it is earned. It is correct to pull the entire AGI amount to the Michigan state return. Now, IF she pays Arizona tax on that income, the Michigan State return will give her credit for the tax paid to Arizona. If she is under the filing requirement for Arizona, and no tax was withheld (which it shouldn't have been since it was a scholarship) she does not need to file an Arizona return. She will be taxed by Michigan on all her income.
No, the Federal return does not care about which state the income was earned in, so there is nothing that needs to be adjusted on the federal return for that.
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