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>
...
Removing a control may result undefined symbol results (e.g. late calls) if the remove control is referenced in logic.
In many cases, it may be more natural to migrate a complex container control to a simpler .NET container such as a group box.
These could also be implemented using gmSL scripting to edit the code before processing.
https://portal.greatmigrations.com/display/GMG/Support+Statement%3A+gmSL+EditSource
See also this article that talks about removing a control that is used in logic.
https://portal.greatmigrations.com/display/GMG/Support+Statement%3A+Upgrading+a+COM+Component+property+to+a+WinForms+Static+property