I think the totalists would argue that heretics don't have the correct "matter" either. If the Cardinals elected a woman, then she still wouldn't be materially pope. She is not a man and therefore does not have proper matter. Likewise, a non-Catholic man does not have proper matter. I think the key here for material/formalists is that the man was not "elected" per se, but "designated".
ETA: Cantarella definitely correct me if my understanding is wrong about election vs designation....I have read the Thesis and tried to make sense of it, but I know my understanding is shaky.
I believe that your understanding is accurate in the highlighted part but I do not see the distinction between election and designation as far as the legitimacy of the papal conclave is concerned. The thesis does seem to recognize that a conclave was duly and legally convoked and that there was an acceptance of the election. It is only after, (because of the impediment of heresy or the intention to promulgate error) that the elected loses jurisdiction and ceases to be true pope.
According to the thesis, arguing from the basis of
Ex cuм Apostolatus, (that the election itself is null because the man elected was already a heretic prior to the conclave), presents a couple of difficulties: First, that the constitution has been indeed abrogated (as far as Ecclesiastical Law, although the dogmatic principles of Divine Law still remain) and second and more importantly, that the prior formal heresy would have to be proved by the competent authority
which has not yet happened. Although the heresy of the conciliar popes have been public with regard to fact, it has not been made public with regard to
imputability because it has not been legally condemned by any legal procedure.