It's been a while, but I believe it may have to do with the following:

An element (or part thereof) can be included and excluded in a service.  But if it is included, there are still two options, either it is in use or it is not in use.  So overall considered, an element can be:

• included and in use
• included but not in use
• excluded

If you exclude it, then there is simply no way that it can still impact the service, that's by definition.  You want the element to still somehow have an impact on the service, even if it is not in use by the service.  So I believe you will have to change your configuration, so that:

1. THIS ELEMENT IS INCLUDED IN THE SERVICE > always  (you want to keep it in there, so that it can still influence the alarm state of the service - you can still use this condition, but only if under specific conditions you want the element out of the service, in which case it cannot impact the severity of that service anymore).
2. ONCE INCLUDED, THIS ELEMENT WILL... > instead of always as you have it now, put in your previous condition here.  Basically you will say, under the conditions I specific, I consider the element to be effectively used by the service and it can fully impact the service.

Now you can use the option that you referenced.  "Maximum severity on element not used".  This will be applied when your element is not used, i.e. if the condition in 2. above is not met.  In other words, your element is still in the service, but considered to be not in use.  You were a little mislead there with the option, but it does effectively say "not in use" and not when it is "excluded".

This is an example of how it should look like:

In this case, LONDON SITE 1 BACKUP is included in the service and considered IN USE.  LONDON SITE 1 MAIN however is not in use.  This is indicated because the color is a bit faded, and it is also mentioned between brackets.  This is the result of saying that this element is always included in the service, but only in use when the condition is met (currently the condition is not met, so it is considered not in use).

And the option to cap the impact is used.  That is indicated by the blue arrow.  Basically you can see that the Audio has a critical alarm, but with that option it was capped at warning level.  So the blue arrow shows that the critical alarm on the audio is bubbling upwards to the service level as a warning alarm (because of the fact that the element is not in active use by the service).  If the element would suddenly become in use (condition is met), then that device would appear in bright white font, the 'not in case' between brackets would disappear, and the impact on the service would go from warning to critical.

I believe this is what you were looking for?

If you go to the ziine.skyline.be system, you should be able to log in with your Dojo account, and you look for the OLYMPICS-OFFAIR service, you will find the above example for reference (not sure though if you will be able to go into edit mode to see the configuration of the service).

Feel free to circle back if this wasn't what you were looking for.