When it refers to blade angle it refers to the angle between the chord line and the direction of propeller rotation.
The important bit in this question is that it is a constant speed prop, you are correct in that the angle of attack does decrease as forward speed increases and so the thrust decreases as well.

Therefore the rpm would increase, the CSU would sense the increase in rpm and would then increase the blade angle to reduce the rpm down to the correct speed and restore the lost thrust.