This cannot be true, because you are saying there are two different definitions of being down. If the ball ends up on the ground then its a completion and first down Iowa State, but since the defender takes the ball away (after he's down as that picture clearly shows) its somehow an interception... BS. The continuation is only on a pass to make sure he has possession and doesn't bobble it. That picture pretty clearly shows him with complete possession and knee on the ground, first down Texas or any team not named ISU.
No. This would not be considered a completion. You have to control the ball all the way to the ground on a catch, not just until your knee hits.