Pardon me if this solution seems clumsy to you, but I am trying to solve this with minimal invocation of generating functions an more combinatorics intuition.
For your simplification problem, I believe that what James Arathoon provided, or something equivalent, is the best you can do. But I actually need a polynomial in $x$, so I still will stick in equation (2).
Let $G(x) = 2(x-m)\binom xm - (x-m-1)\binom{x-1}m$ be the right hand side of (2). For a fixed $m$, note that both $F(x)$ and $G(x)$ are polynomials of degree $m+1$, it is sufficient to prove that $F(a) = G(a)$ for $a = 0, 1, \cdots, m+1$. To be more concrete, Lemma 1 below implies your equation (2):
Lemma 1: For a fixed $m$,
$$
\binom{m}{0}C_m - \binom{m-1}1 C_{m-1} + \cdots + (-1)^{\lfloor\frac m2\rfloor}\binom{m-\lfloor \frac m2\rfloor}{\lfloor\frac m2\rfloor}C_{m-\lfloor \frac m2 \rfloor} = 1,
$$
$$
\binom{m+1}{0}C_m - \binom{m}1 C_{m-1} + \cdots + (-1)^{\lfloor\frac{m+1}{2}\rfloor}\binom{(m+1)-\lfloor \frac {m+1}2\rfloor}{\lfloor\frac {m+1}2\rfloor}C_{m-\lfloor \frac {m+1}2 \rfloor} = 0,
$$
$$
\vdots
$$
$$
\binom{2m}{0}C_m - \binom{2m-1}1 C_{m-1} + \cdots + (-1)^m\binom{m}{m}C_{0} = 0,
$$
$$
\binom{2m+1}{0}C_m - \binom{2m}1 C_{m-1} + \cdots + (-1)^m\binom{m+1}{m}C_{0} = (-1)^{m}.
$$
We will use induction on $m$ to prove Lemma 1. An important fact used to hinge equations among different $m$'s will be Lemma 2:
Lemma 2: For each $m$,
$$
\binom{2m}{0}C_m - \binom{2m-1}1 C_{m-1} + \cdots + (-1)^m\binom{m}{m}C_{0} = 0.
$$
Proof of Lemma 1: Start with the base case $m=1$. This is valid because
$$
\binom 10 C_1 = 1, \binom 20 C_1 - \binom 11 C_0 = 0, \mbox{ and } \binom 30 C_1 - \binom 21 C_0 = -1.
$$
Suppose the assertion holds when $m = k$ and Lemma 2 holds. When $m= k+1$. since
$$
\binom{2k+2}{0}C_{k+1} - \binom{2k+1}1 C_{k} + \cdots + (-1)^{k+1}\binom{k+1}{k+1}C_{0} = 0
$$
and
$$
\binom{2k+1}{0}C_k - \binom{2k}1 C_{k-1} + \cdots + (-1)^k\binom{k+1}{k}C_{0} = (-1)^{k},
$$
subtract the second equation from the first, and using the binomial formula $\binom ab = \binom{a-1}b + \binom a{b-1}$, we get
$$
\binom{2k+2}{0}C_{k+1} - \binom{2k+1}1 C_{k} + \cdots + (-1)^{k+1}\binom{k+2}{k+1}C_{0} = (-1)^{k+1},
$$
which is the last equation in Lemma 1 when $m = k+1$. The other equations can be derived in the similar way.
This concludes the proof of Lemma 1.
Proof of Lemma 2: We provide a combinatoric proof for this lemma. From this, we describe $C_n$ as the number of sequences of length $2n$ consisting of $n$ $A$'s and $n$ $B$'s so that whenever we take the first $0< k < 2n$ letters, the number of $A$'s is no less than that of $B$'s.
(For instance, $C_3 = 5$ because we have the following five sequences $AAABBB$, $AABABB$, $AABBAB$, $ABAABB$, $ABABAB$. We call a length $2n$ sequence of this form an $2n$-admissible sequence).
Let $0 \leq j \leq n$. We now define a way to construct a $2n$-admissible sequence from $2(n-j)$-admissible sequences. We can first start the sequence with $j$ $A$'s. For the remaining $2n-j$ slots, pick $j$ slots and put them in $B$, and then fill a $2(n-j)$-admissible sequence. It can be shown that the resulting $2n$ sequence is admissible. And clearly there are $\binom{2n-j}{j}$ ways to generate $2n$-admissible sequences from a $2(n-j)$-admissible sequence.
For instance, from the $4$-admissible sequence $ABAB$, we can generate five $6$-admissible sequences: $AB\color{red}{ABAB}$, $A\color{red}{A}B\color{red}{BAB}$, $A\color{red}{AB}B\color{red}{AB}$, $A\color{red}{ABA}B\color{red}{B}$, and $A\color{red}{ABAB}B$.
Note that in total there are $\binom{2n-j}jC_{n-j}$ ways to extend $2(n-j)$-admissible sequences to $2n$-admissible sequences. Let us now look at any $2n$-admissible sequence, where we denote it by $S_n$, and see how many ways it can be extended from shorter sequences. For each $j$, let $S_{n,j}$ be the number of ways that $S_n$ can be extended from a $2(n-j)$-admissible sequence.
For example, if $S_4 = AAABBABB$, then $S_{4,0} = 1$, $S_{4, 1} = 4$, $S_{4, 2} = 5$ and $S_{4, 3} = 2$. So $S_{4, even} = 1+5 = 6$ and $S_{4, odd} = 4 + 2 = 6$.
The alternative sum in Lemma 2 then follows from the following Lemma 3.
This concludes the proof of Lemma 2.
Lemma 3: For any $2n$-admissible sequnce $S_n$, $S_{n, even} = S_{n, odd}$.
Proof of Lemma 3: Finally we are not able to avoid generating functions (ugh!). Let
$$
E_{S_n}(x) = \sum_{j=0}^n (-1)^jS_{n, j}x^j.
$$
Then Lemma 3 holds if $(1-x)|E_{S_n}(x)$.
Actually we can do better: Let $c$ be the length of the first $B$ chunk in $S_n$. Then we have $(1-x)^c|E_{S_n}(x)$. (For example, consider again $S_4 = AAABBABB$. Then $c = 2$ and $E_{S_4}(x) = (1-x)^2(1-2x)$).
The reason that this is true can be observed by doing the reverse, that is, "removing pieces (some selected $B$'s and the starting $A$'s) from $S_n$". It turns out that if you removed some $B$'s not in the first chunk, you can always remove any number of $B$'s from the first chunk and the resulting shorter sequence is still admissible. This will provide the $(1-x)^c$ factor, because removal from the first chunk is independent to the removal of the rest.
This concludes the proof of Lemma 3.