it does not sound to me like His All Holiness, the EP of Constantinople, considers the Pope to be an unbaptised heretic. In fact he embraces and kisses the Pope and calls him: " Your beloved and esteemed Holiness".
HAH is simply using the Pope's customary title as an honorific, nothing more, just as he has used the customary honorifics of every other dignitary he has met and dealt with. If the EP met the Dalai Lama, he would refer to him as Your Holiness, as this is the latter's official title.
It's standard diplomatic protocol, and nothing more should be read into it.
I think people continually forget this level of interaction; there is most certainly a system for interaction among leaders of religious groups, especially ones who differ in doctrine, which is why the use of traditional honorifics is so important - nothing says "congratulations" like greeting the man of the hour, saying, "Hey there, schismatic guy, glad you've made it to the top of the heap of unwashed and unsaved masses."
Protocol is important in most ecclesiastical and secular leadership trees. One example I have to deal with on a regular basis: Orthodox bishops interact with their own flocks and with one another. But they don't interact per se
with anyone else's flock. If a parish in Los Angeles would like to invite a bishop from New York to speak at a retreat, they don't call him first,
but rather call their own bishop first, and then he contacts the NY bishop to (a) invite him, (b) give a blessing to enter his canonical territory, and (c) formally hand-off the conversation to the LA parish.
So, too, in the rarefied air at the top of the ecclesiastical heap - the EP was not going to refer to the Pope simply as "Pope," but was rather going to use his honorific, just as the Pope will use the EP's honorific (or any other Orthodox bishop's, for that matter), just as they both use the proper honorifics for presidents, royalty, senators, military officers, and religious leaders. It's just what you do.
You speak a common language if possible (the EP spoke to the Pope in Italian, since they are both fluent in it), you follow the protocol of the host (in this case, the Vatican) as long as it doesn't violate your own system, and you speak cordially to one another, using the title that the other is accustomed to hearing.