It appears that differential.generated-paths doesn't trigger file collapsing. I started off with /\.generated\.cs$/ to try and match generated C# files, but it didn't work.
I tried even basic things like /generated/ to match files that had generated anywhere in the file name, and even that didn't seem to work.
Just some maybe useful information. =D The setting on this instance is set to
@^webroot/rsrc/image/autosprite\.png$@
(and we don't check in these files there anymore it seems anyway so can't prove it works or doesn't work.)
DifferentialChangesetParser->markGenerated() is where the code runs...
I was able to get this to work (i.e. the files were collapsed), but I had to purge the cache first.