I don't know the right answer here, and as always, any situations with customers of size are tricky to handle well. No matter what, it's going to be tough to make everyone come out of it feeling good. But, if a customer of size is not able to sit in a seat with the armrest down, they are supposed to buy two seats. I probably would have (quietly, calmly, and out of earshot of the customer of size) informed a FA that the pax sitting next to me seemed unable to fit in the seat with the armrest down. Then I would have just stayed out of the way (e.g., in the back of the plane), while the FA and/or GA dealt with things. I would not "make a big thing out of it", but that rule exists for a reason (as you found out) and it's okay to politely ask the FA to handle it.