The process for co-option is not outlined in legislation and the only difference between the NALC advice and the CAB advice, from recollection, is that NALC states that if there are an equal (or lesser) number of candidates for the vacancies, then they must be co-opted. The CAB advice is that any decision of the council is by majority vote and therefore any candidate for co-option must have a majority of votes to be elected and therefore there is a chance that they will not be elected.
I cannot see how the 2006 rules are any different to the LGA 1972 - it states the process for filling a casual vacancy whereby a invitation to request a byelection is called and if it is not taken up, then the council fill by co-option. How the council does this, is up to them - by a formal process or asking a mate down the pub to join - either is acceptable in law.