It seems like the idea is to continue the pattern of the back along the sleeves but to knit the sleeve in the round. Is passing the last unit worked just a way of beginning to knit in the round? From here on you do the sleeves on dpns? You're right that the pattern does seem a bit vague on this part. I notice from the projects on Ravelry that the designer has been very helpful at answering questions and this might be a good one for her, Gwen Bortner.
(I'd love to know the final answer.)