The exclusion should get picked up even if the device is not included it will say "Unknown device excluded". Make sure you start the exclusion FIRST, then put the device into exclusion mode. If the hub is not picking it up still, like the other poster said it might just be a weak signal. I have a ZEN77 across my house about 30 ft away with multiple walls between and it gets a direct connection, but then I have a ZEN76 upstairs directly above the hub and it seems very weak for some reason. Possibly the attena in the ZEN76 is in a bad spot and not as strong.
If you have recently paired, moved, or messed with a bunch of devices you will have TONS of messages bouncing all over the place on the zwave mesh (can only be seen with zniffer) while it is trying to sort out all the routes. You might have to wait a couple hours for it to settle down. Also may want to try doing a power down, unplug for 30 seconds and cold boot of the hub to restart the zwave radio. After a cold boot, turn on/off devices that might be used as hops for the new device to be sure they find a good route back to the hub.
If you want to use the S2 Auth pairing Try using the smart start. I have used that on a bunch of the 700 series devices and works good. In the mobile app you go to Tools > ZWave > Smart Start and then scan the QR code from the box or the front of the device. Then all you have to do is power the device and put it into inclusion mode. The hub should automatically pair it using the smart start info.
I have noticed that it will still say "Pending not included" in smart start afterwards so I typically just delete them out of there once paired, to prevent any future accidental automatic re-pairings. I keep all the QR codes from the boxes with notes on them (going to put them into a digital document eventually).