I have found that working by hand and pulling the fabric, I can do a narrow rolled hem or a folded over narrow edge (when using fulled fabric or covering with a lining) quite easily. And in your situation, that's probably what I'd do with the armscye and the sleevehead, then I'd pleat them, then I'd whipstitch the two together.

Your lining technique is actually kinda similar to the 2nd-to-last lining technique here (http://heatherrosejones.com/archaeologicalsewing/linen.html#Linen) (gah, a click here, they're going to take away my web developer license)