Just to let people know. There are several things which I discovered but will not comment on ( for example compiling with debug options on--BTW you have to manually modify Makefiles to turn on debugging. It seems there is no option for it in configure-- and using gdb causes rsync to terminate prematurely ). There just a mishmash of facts that are hard to keep track of.
I got exclude to work. When I exclude /dev rsync does not hang, when I do not exclude /dev rsync hangs.