Restrict Menu options when building Nodes
What I ended up doing was using TEMPLATE_form_node_alter() and creating my own duplicated versions of menu_parent_options(), _menu_get_options() and _menu_parents_recurse() so I could call them instead of the default drupal functions to build my menu. And in _menu_parents_recurse() you can access the link information like link_path, and just set the menu links I wanted to exclude.

function _my_menu_parents_recurse($tree, $menu_name, $indent, &amp;$options, $exclude, $depth_limit) {
  foreach ($tree as $data) {
    if ($data['link']['depth'] &gt; $depth_limit) {
      // Don't iterate through any links on this level.
      break;
    }
    // Exclude menus that are absolute/external
    if (stripos($data['link']['link_path'], 'http') !== false) {
        $data['link']['mlid'] = $exclude;
    }
    if ($data['link']['mlid'] != $exclude &amp;&amp; $data['link']['hidden'] &gt;= 0) {
      $title = $indent . ' ' . truncate_utf8($data['link']['title'], 30, TRUE, FALSE);
      if ($data['link']['hidden']) {
        $title .= ' (' . t('disabled') . ')';
      }
      $options[$menu_name . ':' . $data['link']['mlid']] = $title;
      if ($data['below']) {
        _my_menu_parents_recurse($data['below'], $menu_name, $indent . '--', $options, $exclude, $depth_limit);
      }
    }
  }
}


I was hoping for a more "correct" method (hook_preprocess_link maybe, but it doesn't exist in D7, only 6 and 8) but this one works.