WP_Query: Fetch posts that are in (category1 and not in category2), OR posts that are not in cagegory1

Here we go, try a tax_query instead http://codex.wordpress.org/Class_Reference/WP_Query#Taxonomy_Parameters

...
'tax_query' => array(
    'relation' => 'OR',
    array(
        'taxonomy' => 'category',
        'field' => 'slug',
        'terms' => array( 'event','show_on_front' ),
        'operator' => 'AND',
    ),
    array(
        'taxonomy' => 'category',
        'field' => 'slug',
        'terms' => array( 'event' ),
        'operator' => 'NOT IN'
   )
)