Additional monitoring of a busy server showed that it was the cache only that needed to be removed.

resources/install/scripts/app/xml_handler/resources/scripts/directory/directory.lua

@@ -347,6 +347,17 @@
 			end
 	end --if action
 
+--if the extension does not exist send "not found"
+	if (trim(XML_STRING) == "-ERR NOT FOUND" or XML_STRING == nil) then
+		--send not found but do not cache it
+			XML_STRING = [[<?xml version="1.0" encoding="UTF-8" standalone="no"?>
+			<document type="freeswitch/xml">
+				<section name="result">
+					<result status="not found" />
+				</section>
+			</document>]];
+	end
+
 --send the xml to the console
 	if (debug["xml_string"]) then
 		freeswitch.consoleLog("notice", "[xml_handler] XML_STRING: \n" .. XML_STRING .. "\n");