Obviously not crowning him as a Sultan (that would be ridiculus), but affirming his authority on the millet of the catholics by mean of the caesar title.
After all, the Costantinople ortodox patriarch DID bless the sultan fleet when it left the city
You're right about the title, the problem was that no one in the west took it seriously, since the last Byzantine they saw was a Basileus, nobody understood a word of he was sying (since he was talking greek), and it was a lot of time ago.
On the other hand, in the last 600 years more-or-less all europe recognized that the one blessed by the Rome bishop was to have the Caesar title
Oh I see....
Recognition of Ottoman Sultans as Caesar by the Pope will most certainly happen, it seems(I mean, the Pope will be the subordinate of Sultan and all....)
Of course, HRE won't gonna like that.