General EFIS Question?

I have a Dynon D-180 and I just calibrated the compass. Dynon has you enter Magnetic Inclination and Intensity before setting the four cardinal headings using Magnetic North. I did all that. My question is ? if we fly via magnetic headings then why is it necessary for the instrument to have reference to True North? I hope I?m not showing my total ignorance here?

Magnetic inclination has nothing to do with east, west, north, etc. It's the angle up-down of the actual field lines in 3-D (e.g. At the magnetic pole the lines are vertical). Your efis looks at the earth's magnetic field in all 3 dimensions, and uses that data to help provide long term stability.

Just to add a bit more explanation for the OP...

You're thinking of magnetic DEClination. As noted, the EFIS is asking you for INClination.

Declination is also known as variation.