It would basically be nerfing them down to a base level rather than turning them human! So, for heroic spirits that aren't human, they would still not be human (as, you're right, humanization is only in the cases where stripping them of power/magic would humanize them, or they're robots). ... Let us know if we need to make that clearer.
As for contracts, you're right that they would need to make it their in-game power like Isa did for Tomoe!
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It would basically be nerfing them down to a base level rather than turning them human! So, for heroic spirits that aren't human, they would still not be human (as, you're right, humanization is only in the cases where stripping them of power/magic would humanize them, or they're robots). ... Let us know if we need to make that clearer.
As for contracts, you're right that they would need to make it their in-game power like Isa did for Tomoe!