Supplying current URL to "Path override" in Panels with Views pane
Although this doesn't answer why exactly the term id is being attached (hoping someone might shed light on that), the simple solution thanks to @Letharion was to use the hook_form_views_exposed_form_alter:

function hook_form_views_exposed_form_alter(&amp;$form, &amp;$form_state) {
  $view = $form_state['view'];

  if($view-&gt;name == 'exhibitions' &amp;&amp; $view-&gt;current_display == 'panel_pane_3') {
    $form['#action'] = $view-&gt;override_path;
  }
}