You are being way too hard on yourself - it's really well knit, and just a little bit too small.
Do you have a slightly shorter friend who could use a vest? 
I am a slightly shorter sister that would love a blue vest I think it looks great!
The part about it being tight around the arms is a hard fix, I'll admit that, so that's a good reason not to wear it. But the shortness? Looks cute the way you've layered it. And the side seams? Unless you're a stewardess that has to lift up and expose her underarms all the time (and I know you're not!), no one will really see that. So don't be so hard on yourself!
Onward to fresh yarn and fresh projects. I'm envious of your potential yarn score. Hope you packed an extra suitcase.
Thank you for posting all this on your blog! I'm in the process of making my own vest from the pattern notes and I've run into a couple of speed bumps. It really helps when someone else addresses them even though it's not a really fun thing to blog about. So...I appreciate it. 
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