Organfreak
..However, PIO seems to be a phenomenon which affects small manoeuverable aircraft MORE than civil airliners (referencing the database in the Aristotel article).
Machinbird
I do believe the PF understood he was in ALT2 - after all he calls "I have the controls" (which I interpret as an acknowledgment of the switch) but if he didn't that was also an indication of poor flight deck management and serious training deficiencies.
I think we are all in agreement that sometimes you must act and act quickly. Getting that right depends on your experience and training and here I think the latter let the flight crew down. I am afraid the PF's behaviour fits RR NDBs fourth category.