This issue is resolved in iOS 4.3, and affects only iOS 4.2.6 and earlier versions.
This can occur when an external application processes the attendee's calendar events automatically, which causes Exchange to modify the exception invitation email. When iOS processes the modified email, it applies the exception to all events.
For example, the attendee's account has a Blackberry Enterprise Server (BES) configured for calendar syncing in addition to ActiveSync. The BES server monitors the user's calendar and inbox for new or changed events, which it attempts to automatically process on the user's behalf. If a recurring meeting's organizer cancels a single event in the series, Exchange sends this change to the attendee in an email. When this email arrives in the user's inbox, BES reads the meeting change portion of the email and automatically removes the event from the user's calendar; however, it leaves the email with the exception information in the user's inbox as a reference of what was changed. Exchange sees this situation and automatically modifies the email in the attendee's inbox, which causes iOS to apply the single event exception to all events.