Thanks for the tip Dan, I tried what you suggested but the end result is the same. The referenced mosaic dataset is still showing all the rasters from the original as included in the referenced mosaic dataset. See image below:
The odd thing is that when you add the referenced mosaic to ArcMap and look at the footprint attribute table it only shows the one raster (which was selected via the SQL Query). See image below.
So in effect the referenced mosaic dataset is working as intentded but it's just the contents view in ArcCatalog that is misleading in my opinion but I don't know, I didn't design the software so I don't know if it is meant to be like that