So we have a big cargo workspace, let's say in /workspace/. We have /workspace/vendor and /workspace/.cargo/config which points crates-io to this vendor directory. In /workspace/Cargo.toml we exclude one directory from the workspace:

exclude = [
    "excluded"
]

So, when I go into /workspace/excluded and I try to run cargo build, I'm getting these kind of errors:

error: failed to select a version for the requirement `libc = "^0.2.62"`
  candidate versions found which didn't match: 0.2.50
  location searched: directory source `/workspace/vendor` (which is replacing registry `https://github.com/rust-lang/crates.io-index`)
required by package `excluded v0.1.0 (/workspace/excluded)`
perhaps a crate was updated and forgotten to be re-vendored?

So it seems that the source replacement from .cargo/config is seen as totally separate from the workspace concept. This if of course very annoying and I would consider it a bug. A directory excluded from the workspace should not use configs that are set in the workspace directory.