cat/echo command in du -sh --exclude={} command causing long runs and not functioning as expected

The du command on Linux, which seems to be what you are using, offers a --exclude-from option:

du -h -s --exclude-from=directory_list.txt /filesystem/*

or

du -h -s -X directory_list.txt /filesystem/*

This assumes that the file directory_list.txt contains shell globbing patterns (not regular expressions), one per line, that should be excluded. These patterns may be pathnames, or just names of files or directories, and may include shell globbing characters.

In your command that uses --exclude={`cat directory_list.txt`}, you are trying to get the shell to do a brace expansion, using the contents of directory_list.txt. This does not work as brace expansions are carried out before command substitutions are even considered.

What you could have done, if your du didn't have --exclude-from, is to read the things to exclude from your file into an array, and while doing so, add --exclude= to every element, and then use that array in a call to du:

exclude=()
while IFS= read -r item; do
    exclude+=( --exclude="$item" )
done <directory_list.txt

du -h -s "${exclude[@]}" /filesystem/*

This assumes that, just like with --exclude-from, your file contains one pattern per line.

If you are using a shell that does not support arrays, you have the benefit of getting to type less:

set --
while IFS= read -r item; do
    set -- "$@" --exclude="$item"
done <directory_list.txt

du -h -s "$@" /filesystem/*

This uses the list of positional parameters instead of a named array.

Both of these loops would also preserve whitespace in pathnames, and would not allow the shell to erroneously expand filename globbing patterns, which is a couple of the issues with your grep -v $(cat directory_list.txt) command (another is that you'll pass most of the pathnames from the files to grep as files to search rather than as patterns to exclude).