The law dealing with the procedure by which Congress adopts rules and regulations for the territories is not itself a rule or regulation that is to apply within the territories; rather, it is a procedural rule that applies to Congress and the President and spells out how something becomes a federal law. Nothing in IV.3.2 suggests that Congress can use whatever method it wishes in enacting these territorial rules or that it's somehow exempt from I.7.2. For example, nothing in IV.3.2 suggests that the President can’t veto the legislation Congress passes to adopt territorial rules. To the contrary. a claim that territorial legislation is immune from a presidential veto would violate the separation of powers doctrine.
Before Congress can make a rule to apply in a territory, someone has to introduce a bill for that purpose. Once that happens, I.7.2 takes over. Any attempt to call the bill something else (e.g., a “territorial resolution”) won’t work, due to I.7.3. The whole purpose of I.7.3 was to prevent Congress from circumventing the requirements of I.7.2 (especially the President’s veto power) by calling a bill something else.
There is nothing in I.7.2 that suggests that its procedures apply only to actions Congress takes under its Article I powers. There are other provisions in the Constitution outside of Article I that refer to congressional action – II.1.4 (Congress can determine the time for choosing presidential electors); II.2.2 (Congress can vest the appointment of certain officials in the President, the courts, or heads of departments); III.1.1 (Congress can establish lower federal courts); III.2.2 (Congress can regulate the appellate jurisdiction of the federal courts); III.2.3 (Congress can determine where a criminal trial is to be held if the crime isn’t committed within a state); III.3.2 (Congress can determine the punishment for treason); IV.3.1 (Congress can admit new states). It is absurd to claim that the normal legislation procedures in I.7.2 don’t apply to these areas of authority, especially when you consider that anytime Congress has legislated in one of these areas, it has followed the I.7.2 procedure.
Tell you what, though – see if you can find a case in which legislation outside of Article I has failed to follow the I.7.2 procedure and has been upheld (hint: to my knowledge there’s arguably only one, and it didn’t involve IV.3.2. The case is a very old one and has been the subject of a lot of critical discussion, most of it negative. In fact, it probably didn't involve legislation at all.)
As far as the Downes case is concerned, it never said that no portion of the Constitution ever applies to the territories or that Congress’ power with respect to the territories was unlimited. To the contrary:
To sustain the judgment in the case under consideration, it by no means becomes necessary to show that none of the articles of the Constitution apply to the island of Porto Rico. There is a clear distinction between such prohibitions as go to the very root of the power of Congress to act at all, irrespective of time of place, and such as are operative only 'throughout the United States' or among the several states.
Thus, when the Constitution declares that 'no bill of attainder or ex post facto law shall be passed,' and that 'no title of nobility shall be granted by the United States,' it goes to the competency of Congress to pass a bill of that description. Perhaps the same remark may apply to the 1st Amendment, that 'Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people to peacefully assemble and to petition the government for a redress of grievances.' We do not wish, however, to be understood as expressing an opinion how far the bill of rights contained in the first eight amendments is of general and how far of local application...
We suggest, without intending to decide, that there may be a distinction between certain natural rights enforced in the Constitution by prohibitions against interference with them, and what may be termed artificial or remedial rights which are peculiar to our own system of jurisprudence. Of the former class are the rights to one's own religious opinions and to a public expression of them, or, as sometimes said, to worship God according to the dictates of one's own conscience; the right to personal liberty and individual property; to freedom of speech and of the press; to free access to courts of justice, to due process of law, and to an equal protection of the laws; to immunities from unreasonable searches and seizures, as well as cruel and unusual punishments; and to such other immunities as are indispensable to a free government. Of the latter class are the rights to citizenship, to suffrage (Minor v. Happersett, 21 Wall. 162, 22 L. ed. 627 ), and to the particular methods of procedure pointed out in the Constitution, which are peculiar to Anglo-Saxon jurisprudence, and some of which have already been held by the states to be unnecessary to the proper protection of individuals.
Whatever may be finally decided by the American people as to the status of these islands and their inhabitants,-whether they shall be introduced into the sisterhood of states or be permitted to form independent governments,-it does not follow that in the meantime, awaiting that decision, the people are in the matter of personal rights unprotected by the provisions of our Constitution and subject to the merely arbitrary control of Congress. Even if regarded as aliens, they are entitled under the principles of the Constitution to be protected in life, liberty, and property. This has been frequently held by this court in respect to the Chinese, even when aliens, not possessed of the political rights of citizens of the United States. Yick Wo v. Hopkins, 118 U.S. 356 , 30 L. ed. 220, 6 Sup. Ct. Rep. 1064; Fong Yue Ting v. United States, 149 U.S. 698 , 37 L. ed. 905, 13 Sup. Ct. Rep. 1016; Lem Moon Sing, 158 U.S. 538, 547 , 39 S. L. ed. 1082, 1085, 15 Sup. Ct. Rep. 962; Wong Wing v. United States, 163 U.S. 228 , 41 L. ed. 140, 16 Sup. Ct. Rep. 977. We do not desire, however, to anticipate the difficulties which would naturally arise in this connection, but merely to disclaim any intention to hold that the inhabitants of these territories are subject to an unrestrained power on the part of Congress to deal with them upon the theory that they have no rights which it is bound to respect.
Your public/private claim remains frivolous, as the Edwards court never relied on such a distinction. Nor did the Court rely on any kind of “exclusive legislative jurisdiction” rationale. Tell you what, though: while you’re trying to find a case to back up your claim that legislation outside of Article I isn’t subject to the I.7.2 procedure, see if you can find a case that distinguishes between private and public bills insofar as I.7.2 is concerned.