Index: wp-includes/post-template.php
===================================================================
--- wp-includes/post-template.php	(revision 9819)
+++ wp-includes/post-template.php	(working copy)
@@ -659,8 +659,20 @@
 			$class = 'class="current_page_item"';
 		$menu .= '<li ' . $class . '><a href="' . get_option('home') . '">' . $link_before . $text . $link_after . '</a></li>';
 	}
+	
+	// Because include overrides subpages, we need to reverse engineer the include as exclude
+	if( !is_array( $args['included'] ) )
+		$included = (array) $included;
+	$pages = get_pages();
+	$exclude = array();
+	foreach( $pages as $page )
+	{
+		if( !in_array( $page->ID, $included ) )
+			$exclude[] = $page->ID;
+	}
 
 	$list_args = $args;
+	$list_args['exclude'] = $exclude;
 	$list_args['echo'] = false;
 	$list_args['title_li'] = '';
 	$menu .= str_replace( array( "\r", "\n", "\t" ), '', wp_list_pages($list_args) );