I believe the arm with the black vinyl top cover should be pointing straight up when the slide is closed as shown in picture #1. As the slide is opened, the arm will move along with the slide and will also rotate toward the body of the RV. The arm should not touch anything in its movement. If it hits anything, mainly the part in the second picture, the arm should be rotated to be more pointing straight out.
The purpose of the mechanism is to prevent wind from unfurling the cover when traveling. If the cover becomes unfurled during travel the arm will rotate toward the RV and hit the part shown in the second picture. The unfurling is then stopped. Of course the slide must still be in when the unfurling occurs.
When I replaced the covers last year the arm hit just as you described because the new cover was a little different from the old one. I had to readjust the arm on both slides.
Does this help?