I want to customize nbconvert's output by providing additional TemplateExporter config options such as exclude_markdown when converting .ipynb to .py. However, none of the configs I provide ever get recognized on Jupyter 4.1.0.
What am I missing?

Have you update nbconvert ? check with
jupyter nbconvert --version; this option is relatively recent (commit dates Mars 2017).The version of Jupyter does not matter, it is just a metapackage, and 4.1.0 is likely the version of Jupyter Core, as Jupyter latest is still 1.0.0.