1) If I am reading this correctly the ball is still going to be taken out on the sideline. Then if that is the case and Trail is already on that side he can go ahead and administer the throw-in even if it is in the short corner.
2) It sounds that you are correct. I foul was called and in a 2-whistle crew you switch on all fouls. You did becoming the lead where the foul occurred and you should have administered the throw-in IMO. It sounds like he wanted to not have to move around all that much in the 2-man game.
I may be incorrect, I have lost touch with some of my 2-man mechanics over the years.