I hope my title tells what I want clearly.  I do monthly fulls, and weekly differentials, and daily incrementals.  But I can't prune the incrementals that unneeded after a differential because the rules apply to everything in a directory.
Alternatively, the ability to set a directory with variable appended would be helpful.

Does setting the option to apply retention rules to matching backup sets in the target folder (as opposed to apply retention rules to all backup sets in the target folder) help you out at all?

Unfortunately, no.   Either rule will 'eat into' a previous backup chain if the directories are the same.

Joseph, when using a 7-day retention rule for INCs, they will prune automatically as time moves on... never having more than 7-days worth at any time.  Is that not adequate or are those INCs related to the previous DIFF (that disappear as time moves on) really a space issue?

As you surmized, its the INCs related to the previous DIFFs I am trying to kill.  I backup the backup to an off site disk and the copy from the USB disk to another USB disk is slow.

On another section of the forum, a fellow suggested using two definition files,  each one triggering on odd/even months.  If I used the more restrictive retaining option, I think, I could set  the more the retention rule to run after the backup keeping 1 FULL set and 1 DIFF set. 

True, the second run of an set (either odd or even)  would eat an DIFF but that would be from at minimum 30 days ago, and I'd already have two fulls.
Does that make sense?