Yes, the warmup request is still subject to the same limit; I just wanted to make sure that part of your application was working and didn't have a confounding issue.
The bottom line is that you need to move the dataset initialization logic out of init, and/or find a way to cut down execution time to under 1 minute (either speeding up the logic or optimizing it). If you don't want to pay for a larger instance to speed up the dataset processing, you'll need to modify your application logic. I would suggest (in no particular order) the following:
1. Reconfigure your application's code to separate out parts of the processing. For example, perhaps your init could urlfetch your dataset, and nothing more. When a request comes in, process only the part of the data relevant to the request. Obviously this option might not work if you can't subdivide your data easily.
2. Profile your application's calls using AppStats:
https://cloud.google.com/appengine/docs/java/tools/appstats . If your dataset initialization process involves several RPC calls, you might be able to batch calls together and save some time. For example, instead of using multiple memcache.put() calls you can try moving to AsyncMemcacheService.putAll().
3. You can also cut down on startup time by optimizing your entire app. If you're including many libraries in your application, you can use
ProGuard to help cut down on unneeded files (assuming you're using Java).