Trying to Resolve the Issue With Leo

My perspective on the subject of Vatican II's declarations concerning Protestants may be defined this way:

1. Material heretics are not under the same condemnation as formal heretics (see here, for example, where it says of formal heretics that they are subject to damnation, while material heretics are not, as indicated by the accompanying quotations from St. Augustine and Pope Pius IX and as discussed earlier here). This distinction is confirmed in the words of Vatican II quoted here: "The children who are born into these Communities and who grow up believing in Christ cannot be accused of the sin involved in the separation..." (UR 3), which is really nothing more than a restatement of the policy identified by St. Augustine in the quotation from the Catholic Encyclopedia; hence it seems that to deny the validity of the distinction between material and formal heresy would be contrary to the practice of the Church over the last 16 centuries.
2. Valid baptisms occur outside the Catholic Church. This should be completely non-controversial.
3. A valid baptism outside the Catholic Church accomplishes what a valid baptism within the Church does. If it did not, it would not be valid in the first place; in the second, the Church would not accept the Trinitarian baptisms of heretics as valid. But the Church has done so since at least the Donatist controversy in the 4th century, so that to deny this would be to deny 17 centuries of Church teaching and practice.
4. If a man has been validly baptized, then he is a Christian: after all, this is precisely what baptism accomplishes. If he is not a Christian, then he has not been validly baptized - which would be a contradiction of point three.
5. Protestants today are material heretics, not formal heretics. This should be obvious from the fact that they cannot be formal heretics by virtue of the fact that they have never been under the formal jurisdiction of the Catholic Church. Simply holding to an error that contradicts the faith does not ipso facto make one a formal heretic. Again, see the Catholic Encyclopedia discussion above, which (among other things) clearly establishes that material heretics are not formal heretics even under color of ecclesiastical law (and if they were, the distinction between the types of heresy would be destroyed - which would be irrational).
6. Virtually all Protestants today are validly baptized. There are exceptions among some groups, I think but there is no credible reason to dispute the validity of the general validity of their baptisms. Of course it may be true in any specific instance to have doubts, but that has no bearing upon the validity of the presumption that, generally speaking, Protestant baptisms are valid.
7. Because they are not formally heretical, and because they are validly baptized, there is absolutely nothing that prevents them from being understood to be Christians, and consequently it is certainly valid to make the presumption that they are in fact Christians - and consequently our brothers in Christ.

That's basically the substance of my argument. As far as I can tell, it is consistent with what Vatican II has said. The two points that it hinges upon are that Protestants are not formally heretical, and that their baptisms are valid. There is no valid reason to doubt either of these points - not rationally, and not in the Church's history, either.

Perhaps the sticking point is that historically Protestantism presents something that had never occurred before in the Church's history (assuming that I know enough history to be speaking accurately here): prior to the Reformation, heretical groups who were expelled from the Church vanished. But that is not the case with the Protestants. They haven't vanished. And if St. Augustine's rule about how to treat the children of heretics had validity with the first generation of children, how much more would it be valid with subsequent generations even more distantly removed from the original formal error? I contend that it is an error to consider them to be formally heretical - and Vatican II denies that they are. But if they are not, then it would be an error to treat them as though they were formally heretical - and Vatican II affirms that they should not be.

My affirmation is that Vatican II was a valid ecumenical Council. On the particular point of the Catholic's relationship to Protestants, I believe that the Council's teaching is rational, coherent, and consistent with the Church's teaching throughout the ages - as demonstrated above. Anything that seems to suggest otherwise must be talking not about material heretics, but rather about those who are formally heretical - and consequently it does not apply to Protestants.