Any number of <Exclude> elements may appear below a <Menu> element. The content of an <Exclude> element is a list of matching rules, just as with an <Include>. However, the desktop entries matched are removed from the list of desktop entries included so far. (Thus an <Exclude> element that appears before any <Include> elements will have no effect, for example, as no desktop entries have been included yet.)
It doesent work as expected though. The attached menu file shows that while the items all get sorted into the "menu subfolder" they still appear in the Games root a second time even though they should be excluded there. Worked this way in gnome2 e.g. and doesent work in lxde.