Can't exclude a directory pattern recursively

Took me a moment to understand the issue. Its a tricky one.

-exclude only applies to basenames of items (i.e. myfile.txt), not the fullname
(i.e. C:\pkgobj\myfile.txt) which you want. So you can't use exclude here.

But there is a workaround using Fullname and -notlike

$root = "C:\Projects\MyProject"
$allitems = Get-ChildItem $root -Recurse | Where {$_.FullName -notlike "*\pkgobj\*"}