Amy, it's even too short for my husband! So side panels won't help. I guess just chalk it up to beginner's mistakes and since I probably won't wear it that much, I'm not going to bother putting more work into it by making sleeves for it. I'm just going to finish the ribbing around the arm openings and wear it over a T shirt or something now and then just so I can say I made it! I learned a lot and the next one will go much nicer.
Amy, I saw the picture of your sweater for your nephew - it was adorable, if small - and he still looked awful cute wearing it! I think I'd buy a stuffed bear and put it on it for your nephew! Then its life has been extended for many, many years!