Apparently you've never worn a shirt that had a hole worn at the elbow..... I can tell you. ( and I'm sure there are others) that when there is a hole in the sleeve at the elbow when the arm is bent as Lee's is in the photo, the elbow usually pops out of the hole.
No, you're not comparing apples with apples, a hole in a shirt elbow is created when there is friction at the elbow which is usually when your elbows are resting on something, not when your arms are in the air. Doh!
In this arrest pic Oswald's arm is up and in addition the cuffs are restricting movement and dragging the shirt further down.
The red outline simulates the amount of shirt which would be seen when hanging naturally. Also note the amount of bunching in the area between the elbow and shoulder.
Here we see how a generic long sleeve shirt hangs at the wrist and as can be easily seen the above image shows the cuff way down Oswald's forearm.
JohnM