Does the 10% 401k early withdrawal fee only affect your federal taxes. I qualify as an exception. When entered, my federal amount due decreased but not my state (NC).

Correct.  NC does not have a specific penalty for an early withdrawal..

Just make sure..on the followup page to the main 1099-R form that the NC Distribution amount is entered...it must be either box 2a from the form, or the federally-taxable amount of box 1 if box 2a is empty...but for a 401k distribution, it is usually the same number.