This line seems as though it should be disallowing Simply Swords items to appear in Spectrum's loot tables, but this is in fact not what happens - the items still appear in that mod's loot.

Do you have another mod interfering with your loot? Can you isolation test this with only Simply Swords + Spectrum & their dependencies?
So far as I can tell, this should work without any issue - the loot path query is correct: https://github.com/DaFuqs/Spectrum/tree/1.20.1-main/src/main/resources/data/spectrum/loot_tables/chests