Yes MapPoint's Territory Feature has its limitations - territories must use whole "units" (eg. zipcodes, census tracts, etc) and not overlap. Note that a territory does not have to be contiguous though.
You could use a smaller unit if this is convenient (ie. census tracts). Otherwise, you are going to have to manually draw freeform shapes to represent your territories. Note that these cannot be used in the Import/Link wizards.
Richard Marsden
MapPoint Add-ins at Mapping-Tools.com