interlocked blocking ... or not?

[kentref]

Varsity game last night (8 man in Iowa)
The home team's kickoff return team featured a 3 man "wedge" and on a couple of the returns they actually held hands as they started up the field. They released hands a couple steps before they initiated any contact on a block.

Rule (2-3-10) states that "Interlocked blocking occurs when one player grasps or encircles a teammate just prior to or while blocking an opponent."

We flagged this once and then after discussing it, waved the flag off because (in our judgment) the R players had released hands several yards (about 3-4 yards in this case) prior to contact with any K players.

K's coach was livid, saying that the players can't (hold on to each other) at any point.

We plan to contact the Iowa association folks to get their interpretation. What do you guys think? This is the first time I've ever seen it in a game.