Turning rsync verbosity way up shows the problem:
rsync_short_args -avvv
Output:
[client] add_rule(-s "SKIPTHIS/")
Whereas when I was copy-pasting into the shell, the shell was consuming the quotes and rsync said:
[client] add_rule(-s SKIPTHIS/)
Changing the exclude rule in my config file to:
exclude SKIPTHIS/**
works.