I need to find out more about the Regency system in Austria.
But something very interesting would be if more tolerant people took over the affairs of Austria.
For example Melchior Klesl was a pacifist and during the reign of Matthias tried to establish religious tolerance in the Habsburg lands. In 1618 he was dismissed by Ferdinand II, which partly led to the Thirty Years' War.
I'm not sure Klesl was a pacifist per se, more that he was just pragmatic especially compared to Maximilian III and Ferdinand II (for whom Max served as regent). I think Klesl also tended to approach conflicts from a political rather than religious perspective (ironic considering he was a bishop). He was very concerned with preventing the various Austrian Estates from allying with one and other in order to extract more concessions from Matthias. Though I agree if his rule continued, say as a regent for Matthias' son in Upper and Lower Austria, the situation would be quite different.
I assume that Klesl would be able to secure Matthias's son's election in Bohemia and Hungary at the cost of entrenching the Letter of Majesty and privileges won by their respective estates over the last few decades. But I doubt they'd let Klesl have any role in either regency so he'd probably be limited to some kind of governing role in Austria.
TLDR - due to peculiar specifics of Imperial Vicars institute (and the fact that these Vicars in 1616 would be Electors of Palatinate and Saxony), we can see Imperial throne and the kinghood of Bohemia and Hungary being separated for a while for the first time since Charles V.
Yeah, that's a big problem. I kind of agree that Albert might agree to election when Matthias dies in order to serve as a placeholder but that only postpones the problem a few years and Albert would probably realize that. Leopold V might try and put himself forward as the next placeholder since he'd tried previously to get Rudolf to name him as heir. On the other hand he was on such bad terms with Matthias as a result of that episode that the circle around Matthias' son isn't likely to look favorably upon his candidacy. Perhaps the rest of the family buys off Leopold with the Tyrol (which he got anyways IOTL).
I think its worth considering who would essentially have custody over Matthias' son. The boy would only be seven upon his father's death and his mother is presumably dead too so he has no family except his uncle and his cousins. Presumably Matthias would make provisions for him in his will but there's no guarantee that it would be followed. He'll likely have been elected in Bohemia and Hungary but it would be too risky to have him reside in either with their estates having so much power. I think that the other Habsburgs would equally object to him becoming Klesl's defacto ward in Vienna even if Matthias named him the boy's guardian. So it's entirely possible that he spends the next few years either in Brussels with his Uncle Emperor Albert or in Graz with his cousin Ferdinand. If the latter then Ferdinand is well positioned to be elected as the next Emperor but he'd be hard pressed to maintain the Imperial court with only the resources of Inner Austria.