I figured out that this is indeed the case. Therefore I need to have two separate urls to be able to use urlargs. One as a server url without urlargs and one for the updates with the urlargs being replaced.
The downside of this is that although I block updates for a particular user the user will still know there is an update available because the wyserver.wys is not blocked.
To solve this problem I had to use the -server parameter and add this programatically to the command. This means I have to include the url in my program rather than having it in the client.wys file.
I'm actually wondering about the reason not to support urlargs in the server url.