A bit later in the same chapter he says "[...] but it serves to aknowledge plainly our ignorance of the cause of each particular variation", and "The evidence that accidental mutilations can be inherited is at present not decisive". Oh, and the first two chapters are dedicated to breeding and human selection, and he legit says "if you went to a breeder and explain our theory about extinct variants being the ancestors of their cattle, they'll laugh at your face".

It seems to me that he understood the basics, but the scientific community was still divided and colecting evidence was quite hard at the time.