Christopher,
After investigation, unfortunately you can have a mixed setup on a Task where you have both Resources that update their time using Timesheet AND Email Only users updating time via Progress Update Report. It can only be one way or the other. A suggestion would be to leave the Task as is for the Resources using Timesheets and create a secondary Task for the Email Only users. Make those Tasks 'Update Actual Effort from Timesheet' = FALSE/DISABLED and the Progress Update Reports can be used for the Email Only users.
Sincerely,
Boris