Have you actually tried any of the many VR games which use IK, or is this just speculation? Because I have tried it, and it's not really confusing at all. True it's not perfect, but it's accurate enough that I'd say it's far less confusing than just not having arms at all.

Humor me for a moment and just load up Echo VR and stand in the main menu looking at your arms.

Where in that scenario would you say you are confused about the position of your elbow?

Eh, Echo's IK works great 98% of the time. The other 2% it's anywhere from slightly off to completely unaligned and pointing nonsense directions. I don't think there's a way to do better than this with current sensors. Valve probably decided they didn't want that kind of amateur-looking content in a game they're betting the (VR) farm on.