In case anyone else has the same issue as I did, here's a tip: don't put
comments on the same line as the exclude.

I had the following:

/usr/local      # populated by cfengine

However, there's an easy line to miss in the admin guide that states
there cannot be any blank space after the exclude directive.  I couldn't
figure out why my exclude's never worked, this is why.  Once I took out
the comment and removed all following blank spaces it worked.

Just an fyi.
-- 
=====================
Jeff Kennedy
Unix Administrator
AMCC
jlkennedy AT amcc DOT com