Thank you for your inquiry.
DFAS needs to issue you a corrected W-2. In theory, you could file your tax return using the current W-2 and separate out the portion of exempt income; however, getting a refund would be much easier with a corrected W-2.
If an employer issues an incorrect W-2 to an employee, the employer is legally required to issue a corrected W-2 to the employee. In that sense, the IRS is correct.
I would explain this to DFAS, and if they refuse, I'd ask to elevate to management. If after you've exhausted this process, and DFAS has refused, document so by certified letter to DFAS, keep in your records, and attach a copy, along with your rating to your return requesting a refund.
Though a W-2 is wrong, you have proof of your exempt rating, which should suffice for proof in your refund.