It says as a married couple filing a joint return you may be able to exclude part of your income from Maryland taxes. Unclear what they are asking?

Per the State of Maryland, a deduction of up to $1,200 is provided for two-income married couples who file a joint income tax return and who both have taxable income. The income can only be from wages, pensions, or business income. For this section in TurboTax, you would enter your portion, as well of your spouses portion, for each line requested.  

Does this mean that I can still enter the 1200 deduction if I work in Maryland and my spouse works in Delaware?

Yes, if you're both full- or part-year residents of Maryland and are filing Form 502.

See the TWO-INCOME MARRIED COUPLE SUBTRACTION WORKSHEET (13D) in the Instructions for Maryland Resident Income Tax Return with Form 502, found in 2020 Individual Income Tax Forms for more information.