The unemployment exclusion is not an election; the law says it "shall" be used. 

Are you asking if you should apply common sense to an IRS programming glitch?  That's not how it works around here.  When IRS says jump, we ask how high.  

But electronic filling does not mean automatic acceptance. Many of the 7 million returns left over from last year were filed electronically.  If IRS has a filter to prevent acceptance, it may also have a filter that requires review when the only withholding is on a 1099-G that they say they won't have available until after March 31 anyway. 

A paper return might be the fastest route to a refund.  Let us know how it turns out.