He should be banned but they simply can't support the ban on a correct ground. Pogue quoted the applying article earlier on this page:
Retrospective bans are based on this article, BUT Zlatan's elbow is not an off-the-ball incident since it happend right where the ball was at that moment.
This will be a precedent which can be used in later incidents where a ref judges a 'red card tackle' as non-deliberate or non-violent and gives a yellow card. These kind of situations are not open to retrospective action right now because he saw the incident and it wasn't off-the-ball, but that's exactly like Zlatan's elbow - ref saw it and it wasn't off the ball. So if they're banning Zlatan right now, they can take retrospective action against anyone in the future even if the referee saw the incident, and that's not what the panel is for.
Don't get me wrong, I also think Zlatan should be banned. And I 100% agree with the bolded part of your post. But since that's not the way it is right now, they can't base this ban on a correctly applying rule.