Robert Bahn why do you have other folks' You Tube Videos listed on your website?
I'd make a rest for the router base the same thickness as the arm.Bill,
I'm trying to imagine how that could be done.
In my mind you'd have to use a very tall aux router fence in order to complete the cut with the router bit vertical or a horizontal router setup using the table as support.
Either way the short leg of the assembly and a good portion of the curved component will have to be hand mortised because the glue up is a done deal.
If the arm is wider than the panel, it could be a slot cutter, with a few passes. Then the arm fits on the panel. You could do it with a slot cutter and make a shaped spline like you sketched. It just seems chincy having the arm teetering on the panel with only a spline. It would likely work though.
The 1/4" spline is what was concerning me. Through dowels was my other thought. I thought of gluing it in place and when dry, adding the dowels.
The arm is flush with the panel on the seat side so that I can open the seat for storage with out complicating the box lid.