SJSinNYC,
My understanding is that the elbow may be OK to be uncovered, BUT absolutely nothing above that. Therefore if a shirt goes to the elbow (but not including), the lady must not really move her arms so that the sleeve does not move and reveal any part of her upper arm.
Technically your Rav’s psak sounds right to me. Practically the psak sounds rather difficult to implement.
BTW, the same applies to hemlines of a skirt. Even if the hemline goes past the knee, unless a good 6 inches past, the thighs will be uncovered sometimes, esp when sitting.