It's sounds like you have this all well in hand. Yes, K17 and place the remaining sts on holders, then turn as you would at the end of a row. You're now on the WS row, bind off 2sts (the neck edge) and purl across to the armhole edge. Turn again to the RS, the front of the vest facing you and bind off one stitch. You're essentially shaping the armhole at this point.