Put the hotspot to the middle left of the arm object (hit 4 on the num pad with the hot spot tool).
Have an image point on the player where you want the arm attached (let's call it "ArmPoint").
Always position the arm object at ArmPoint, and set its width to distance(player.x, player.y, hand.x, hand.y), and set its angle to angle(player.x, player.y, hand.x, hand.y). That should be roughly what you want, might need some tweaking of hotspots and imagepoints.