You make sense, but I can't make head nor tail out of those directions you quoted!! Well, reading them again, they do, sort of, but could have been clearer.
Before you panic about the size discrepancy, try what I do. I can't guarantee it will work, but you'll get an idea if you can ease the sleeve to fit the hole.
I ususally take a piece of yarn and slip it through a stitch at the top of the sleeve and at the shoulder join and tie it so those ends are together. I do the same at the underarm of the sweater and the seam of the sleeve, as well as halfway up the back and front. You should be able to do a little stretching of the sleeve to make it fit in the armhole. You don't want it to be exactly the same size, or it will bunch.
I hope this is clear enough, and I hope it works out for you.