What should have happened here?

[mbyron]

Originally Posted by Reffing Rev.

Well,

Live ball foul for illegal motion against A.

Dead ball foul for personal foul againt B.

Play ended short of line to gain.

Team B has the choice of accepting or declining the penalty for A's foul.
Take the penalty it will 5 yards agaisnt A and then 15 yards against B, if the distance is enough for a first down, then first down for A, if not then repeat 4th down.
Decline the penalty and it will be B's fall 15 yards behind were the play ended for the personal foul.

Right, though this should be K and R.

If the officials presented the options to B correctly, it should have gone something like this: "You can accept the penalty for IM and give them a first down after we enforce the penalty for the late hit, or you can decline their penalty, keep the ball, and start 1st and 10 from 15 yards back."

R probably kept the ball by declining the penalty. If that's what happened, it was not "waved off" (as the OP suggests).