It seems that the selective advantage needs to be looked at from an alternative point of view as it is unlikely they evolved tiny arms because they worked any better than big ones. It seems reasonable that in an animal reliant on its hind legs for propulsion and a massive set of jaws filled with banana-sized teeth for everything else, arms carried no useful baggage. Any mutation that coded for smaller arms resulted in less protoplasm being wasted on non-essential structures, hence a selective advantage in tough times. How genes actually operate to code for size and structure is not well understood, but certain genes are often closely linked to each other. This selective advantage may have caused female Tyrannosaurs to be attracted to males with big legs and impressive short-arms.
Some snakes still have vestigial leg structures and look how long they've had.
I have seen speculation that the size of the arms decreased in order to improve balance, but I believe this line of reasoning is flawed. Even fairly long arms could always be positioned so that stability wouldn't be impaired, and consider the advantage of using them for stability while crossing rough terrain. Actually, forelimbs would have to be huge in order to have an impact on balance close to what one of their meals must have had. Imagine a giant theropod tipped forward with a massive load of meat in its foregut, unable to right itself. Perhaps chronic heartburn or terrible sciatica was the real cause for their extinction.