Armor worked okay for me, but I wasn't using a female elf, so maybe the bug is tied to that model?
Or maybe it's happening because of some mod you're using?
Have you tested it by putting the armor on another character? Or removing a mod and seeing if the issue persists?
I am not using mods. Put the armor on Shadowheart (since she is a half-elf) and see what happens during conversations, especially when she crosses her arms. When she's not crossing her arms, notice how the elbow geometry slides up and down her arms.