I don't disagree with your analysis, but... The players after Villain were going to fold no matter what Villain did. They had garbage hands and knew it. They were planning to fold as soon as they saw the flop and were simply waiting for someone to bet ahead of them and have the action get to them. (Granted, I'm speculating here, but I think this was probably the situation.)
After Hero made his bet, as soon as Villain did anything that looked like action, up to and including scratching his nose, they're going to throw their hands at the dealer.
Can the dealer be faulted for not stopping the action quickly enough to prevent a couple of insta-folders from insta-folding before he can even talk to Villain to clarify his bet?