I don't go by the arm rule either. I get in the saddle, on the horse and stand (heels down, toes in) there should only be about an inch or two at the most between your crotch and the saddle. Just enough room to get your butt off the saddle to ride comfortable in a trot and canter... too short will make it awkward, too long will make it hurt. Usually your body will tell you the day after a ride if your stirrups aren't the right length. My legs will be sore in places they shouldn't be... Also remember that with a leather saddle that is used often, you might have your left stirrup on a lower hole then your right. Leather stretches especially on the left side from mounting.
For me it varies on what horse I'm riding and what I'm doing.
If I'm starting colts, doing a lot of arena work or cutting then I keep my stirrups pretty short. I like a little space between my knees and my saddle. For me that really helps me use my calves, and it's not too short, that I still have a deep seat. I have noticed a lot people usually have the opposite problem-riding with stirrups too long. It looks as though they have to grip with their knees and thighs to stay in the saddle.
This is my deal too. I keep my stirrups fairly short when I'm riding colts. That makes it easier to keep my calves close to their sides. I have found that I am more likely to try to brace against my stirrups if they are a touch on the long side. Right now, I am riding a green quarter pony that I have to take my stirrups up a hole for because he is so narrow. If I feel like I'm "reaching" for my stirrups just to keep them on my feet, then I lose some of the security in my seat.
The most important thing you can really do is to find a length that is comfortable, secure, and balanced for you. What's comfortable for one person may not be comfortable or secure for the next. What you might try is starting out by adjusting them one hole higher than level with the bottom of your foot, then keep shortening them until they feel right. If you go a hole too far and they start feeling too short, then let them back out and you'll know then what is the most comfortable spot for you.
This is about where I keep mine when I'm riding colts.
When I'm in my cutting saddle, my feet kiss my stirrups as my trainer says. They can touch, but I can't use them. I ride rather long stirrupped (new word!) in my cutting saddle however.
When it comes to my barrel saddle, sometimes I feel like a jockey. They aren't real short or anything, but they make me feel a liiiittle bit more secure.
It works, it's comfortable, I'm not sending my horse the wrong cues, so it works!:)