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Q: We just want to exclude a control that lives in the VB6 code so that it disappears from the resulting C# code.

A:

Controls declared in the property bag have a different lifecycle than symbols declared in logic or COM APIs. They are a bit stubborn to get rid of.

A further problem is that the vsElastic is a container control. You need to retain the contained controls when you remove the elastic. You can try using two preedits to remove it from the source: You have to remove the top of the control declaration/initializations and also remove the End; leaving the contained controls in place. I do not think the unusual indentation of the remaining content will be an issue.

Q: We just want to exclude a control that lives in the VB6 code so that it disappears from the resulting C# code.

<Compile...>
<Fix...>
<Replace name="remove the Begin vsElastic and its properties up its first child control.  Note that  '…' is a multiline wildcard" >
<OldBlock><![CDATA[
      Begin vsOcx6LibCtl.vsElastic Base 
      ...
         Begin VB.CommandButton cmdExit 
]]></OldBlock>
<NewBlock><![CDATA[
         Begin VB.CommandButton cmdExit 
]]></NewBlock>
</Replace>

<Replace name="Remove the End of the vsElastic">
<OldBlock><![CDATA[
         End
      End
      Begin VB.Label Label9 
]]></OldBlock>
<NewBlock><![CDATA[
         End
      Begin VB.Label Label9 
]]></NewBlock>
</Replace>
...

In many cases, it may be more natural to use Refactor commands to migrate a complex the container control to a simpler .NET container such as a group box.  

These could also be implemented in a more general way using gmSL scripting to edit the code before processing.
https://portalgreatmigrations.greatmigrationsatlassian.comnet/wiki/display/GMG/Support+Statement%3A+gmSL+EditSource

See also this article that talks about removing a control that is used in logic.
https://portalgreatmigrations.greatmigrationsatlassian.comnet/wiki/display/GMG/Support+Statement%3A+Upgrading+a+COM+Component+property+to+a+WinForms+Static+property