I've just started seriously training the steps learning how the partnering works:

Here's my problem/question:

On the backwards-change-edge-twizzle on the first length of the ice, my left arm can't do the reach behind my back arm thing (well, it can physically, as long as I don't mind the part about dislocating my shoulder). We've found that doing a simpler transfer where my arms can stay by my sides isn't a problem which my coach seemed to think was allowed.

How does this work? Are there different variations of the arm changes allowed in the dance or am I going to get in trouble with this when I test it?

You shouldn't get in trouble...(unless possibly you get a REALLY picky judge)...there are different versions of holds for most of the higher level dances.

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"Keep a positive attitude!" ~ Marie-France

No it shouldn't make a difference, I've skated both ways on test. According to Mr. D., senior competitors aren't supposed to do the two handed version any how, the only point of contact should be via your right hand being over your head. I used to do it that way when I skated with Mr. D., when I started skating with Mr. L., I had to relearn that step doing the two handed version.