This was filed in the contrib area as
However, upon further testing, this doesn't seem to be working in any of my moodle instances. Therefore, I believe the problem is in core.
When I go to the grade exceptions screen, I
select a student who is third in the list
select the third assignment in the list
click "exclude from grading" and the third student is excluded from the FIRST assignment in the list.
No matter which assignment I select, the exclusion is reported to the first assignment in the list.