I think the main point of this decision is that the "schism" had only been around for 100 or so (or is it less) so it isn't actually all that ridiculous to put things back the way they were less than 100 years earlier. Ending the schism doesn't mean every catholic suddenly follows the orthadox ways it merely means they stop caring about the differences due to the papacy no longer being such a large player in politics.
Schism ocurred in 1054 after disagreements over primacy of Rome vs the Traditional pentarchy. So at the start of the game in 1066 the schism has been going on for only 12 years. Not hard to imagine ending it soon after if Basileus occupies rome and tells the pope to toe the line.