What word describes this form of unreadability best?

As Wikipedia's article on ALL CAPS indicates, it is legibility which is affected. While it doesn't state that the text becomes completely illegible, it notes that the practice leads to low legibility.

Bad handwriting is considered to be cacographic.

While I don't think that they really address the fact that the individual letters are clear, you can also consider incoherent and indistinct.

Its both "less legible and less readable". The words illegible and unreadable are too strong. Besides the legibility of the headline depends on the context, like a newspaper daily having its name on the top most headline of the newspaper, a form of art(calligraphy), etc. They can also mean shouting, if used in emails and such media.

Depending on the nature of the headline, you might call it ambiguous, incomprehensible, or incoherent.

Ambiguous (open to more than one interpretation--now here vs. nowhere):

JOHNISNOWHERE

Incomprehensible (no meaning at all can be extracted):

BLAHEDFRGOWHECHLEMINGFRUD

Incoherent (words with apparent meaning, but used illogically or inconsistently):

FREDTHEBOBBININTOGREENANDSPACKLEBLUNT