Challenge
A container (folder, host, cluster, etc.) is added to the backup and contains templates inside. However, if you disable "Backup VM templates" in "Exclusions...", the templates still end up as failed tasks in the job instead of being skipped.
Job log contains the following line:
Error Cannot process <VM Name> (vm-vmid): template processing is disabled (System.Exception)
Solution
As a workaround please specifically exclude each template by adding it to the VM exclusion list.