Thanks for your reply.
Here's the thing though, I do not want the arm animation supressed. I am fine with the avatar's arms flailing about while selecting things. The problem I have is that it IS supressing these animations. It allows the arms to move to the selected target, but then the arms freeze in that position until the animationOverride is removed.
Oddly, if I crank up the priority and use an llStartAnimation, it works as I would expect - arms move about while selecting, and when the object is done being touched, the arms return to a resting position. It's only a problem with llAnimationOverride, which is why I suspected this is more scripting than animation, although it certainly walks the line! I would just use llStartAnimation, and I still may if no one can help me out here, but the code controlling the animation is much cleaner if I'm able to use llAnimationOverride.
In terms of animation priorities, I've used animations between 2-4 and they all have the same issue. Also, I see that beyond the selecting animation, when the AO starts on login, the arms are permanently stuck in the T-pose until the animationOverride is removed.