I was finally able to figure this one out… Although I have to set the filter directly on the widget_categories_args method, so it does take two filter statements to do it.
function my_categories_filter($cat_args){
$cat_args['title_li'] = '';
$cat_args['exclude_tree'] = 1;
$cat_args['exclude'] = 1;
$cat_args['use_desc_for_title'] = 0;
return $cat_args;
}
add_filter('widget_categories_args', 'my_categories_filter', 10, 2);