Well, I like the idea that you guys propose that they have decided I won't go there anyway, so they don't want to waste their time (it makes me feel good anyway). The thing is, it still seems odd as a state school, like you've mentioned... It's certainly plausible that I would go to my state school for financial reasons (actually it's probably even true), and I am by no means guaranteed admission to Michigan, so I would expect them to at least entertain my application. Besides, it seems to me that rejecting "over-qualified" applicants is far too mechanical, even for a medical school, as there could be any number of reasons why I would want to go to MSU... I.e. if I really like the E.Lansing area (which I do), if I have a significant other attending there (which I don't), or perhaps I've even been a spartan fan my whole life, and want to go there for that reason (which is not the case).
To be honest though, it is not a first choice for me, and if I got into Michigan, I'd probably go there, although I do think I would enjoy State too.