The co-option of new councillors is an informal procedure and therefore can take place using whatever method the council chooses - you can formally interview candidates, pick a name out of a hat or ask a bloke down the pub to become a councillor if there is a space available. Therefore the requirement for the co-option meeting that you mention is not a legal requirement and therefore being quorate is not relevant.
They become a co-opted councillor when they sign their acceptance of office form and it is countersigned by the Clerk. The are required by law to submit their register of interest form within 28 days of this date, otherwise they are breaking the law and will lose their seat.
So whilst what the council did was galling and not best practice, it is not illegal. The signing of the form makes then a councillor.