I think you have two options, either the Thark way or you make the top arms larger than the lower so that the lower will fit into the armpit of the upper when the upper arms are down. If you do that, then the pects wouldn't have to be separated as upper and lower.
Yoyoyo Update on my tower model. I'm pretty much juggling back and forth on the tower and the dragon's den at this point :) The tower texture is pretty advanced. Here is what I have so far. Hope you guys like it :) Cheers