It is an attempt to tear down the borders of the Church as a visible society and describe her as a 'semi-visible' entity in communion with the numerous sects of perdition in the world. This was the intention behind the deliberately ambigious language used.
Was this part of Vatican II's "ecuмenism" techniques to show Protestants that we've changed and that we believe in the "church" that they believe as a federation of Christian communities?
This ecuмenism that we've shifted to to promote "Christian unity" is a joke. I don't think the Church should be involved with any Protestants to promote a so-called "Christian-unity". The only Christian unity is that where heretics rejoin the Church. I think that was Pope St. Pius X that said that, but I might be wrong.
Did the Church always call Protestants heretics up until Vatican II? I know that now we call them our "seperated bretheren" but that's probably because calling someone a heretic would be politically incorrect and could hurt their feelings.