Disable Alerting by Instance at Resource Group Level?

For your direct question, no that isn't possible currently.
You have really two options and it looks like you and Mike have touched on them.
Either do an alert rule to capture them via the instance name and blackhole them, or add a filter into the Datasource itself and drop it.
Personally I would prefer the alert rule route myself, that way I could verify the update did break the monitoring, but also, after it went into a bad state, I could just ack (if you do that kinda thing) them and then remove the alert rule.