In this case, TC would argue that they are distilling his memo by using the phrase "biologically less capable of engineering". Personally (and as a former lawyer, but not a libel lawyer), I think this position is not especially strong, since he focused mostly, if not exclusively, on inclination-type evidence. If you're going to give a one-sentence summary of the memo, you probably shouldn't refer to ability instead of inclination.
And given that the person they're talking about just sued Google, I'd say it's unwise to use a characterization like this—even if it is ultimately legally justifiable. Why not say "biologically less suited for engineering", which would encompass the possibility of both ability and desire?
Maybe you shouldn't, but it ain't libel.
Not if it is anything resembling a reasonable interpretation of the text.
I'm not weighing in on whether this evidence (which was based on SAT, IIRC) is correct or has been interpreted validly. I'm just pointing out that this was what Damore claimed (after the snafu arose—so take with at least a grain of salt) this statement was in reference to. I'd love to know if others have different information, especially if it was in earlier drafts of the doc.