All of your characterization here is correct, but does it really make sense to classify it as an internally discovered security problem instead of a potential-or-real-breach when it was present for
years, trivially exploitable by third parties, and is impossible to vet? There's no way to know whether or not it was used because there was no logging in place for third-party use of user data, and apparently no audits (manual or automated) were ever performed of these APIs. Google more or less admitted that all they had to go on here was an examination of the third parties who potentially had access to the data, because they have no way to know what they actually did with it and apparently can't contact them to find out.
The reporting is definitely exaggerating the significance of the data that was exposed and making it sound like it's known that the data was collected by third parties, but it's absolutely the case that the ball was dropped here and it's inappropriate to pretend nothing happened. There's simply no way to know, which is itself a breach of user trust.
It's kind of a no-win situation here given the way the media reports on these matters, but attempting to keep it quiet was incredibly foolish - everything remotely bad that happens at Google is going to get leaked by internal troublemakers now, and legal/pr should know that and should have gotten ahead of this.