I’m bringing this up because, for many years, I was one of the folk who spread the idea that it actually was supposed to mean “the blood of the covenant is thicker than the water of the womb.” But there’s no strong historical basis for this, lovely as the idea may be.
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As for the “bad apple” one, I didn’t realize that it was commonly misunderstood. I always felt like someone mentioning that someone was “a bad apple” was an almost violent accusation: the person needed to be extricated from the group, less the group become infected by their corruption. I am now trying to think back to times when I’ve heard this one used and wondering if I misunderstood the intent.
Yes but "There is little evidence of the phrase being used in this second way.", citations located at wikipedia.
So I think it makes more sense to go with the interpretation of "if someone lists an exception, then that's proof of a more general rule that it's an exception from". But with that use, something specifically has to be an exception. Anyone applying "exception proves the rule" to an anecdote is using it wrong.
It still retains that archaic meaning in the phrase you mentioned and terms like "proving grounds".
Edit:
And like so many other proverbs like "A few bad apples", "Blood is thicker than water", "Carpe diem", "The exception proves the rule" means exactly the opposite of what most people think it does.