Just wanted to update this thread in case anyone is looking for a solution to this. Seems there is a bug in infopath for this filter. If you put in 'equals' it will work. It will only show what was already selected. But if you put in 'not equal' it will not work, it will still show items in the dropdown that were already selected. To fix it, copy out the xPath. Now replace:
. != xdXDocu...
with
not (. = xdXDocu... )
Once I did that it worked! Thank you Hillary, would not have tested this approach without your posts!