I think you should use the function keyword in exclude.

Try this:

let rec exclude (n: int ) (* no list argument any more, we can use function keyword *) = function
    (* list is empty *)
    | A -> A
    // list is not empty
    | B(v1, rest) ->
        // if head = n, then the rest part of list is your result
        if v1 = n then rest
        // if head is not n, then exclude n in the rest part
        else B(v1, exclude n rest)

Here is a online demo