Thanks for your advice Helen M, Ellabella and Ouryve, I have tried doing these sleeves both ways, and have even hand tacked a line to follow, this fabric seems to have a mind of its own. The Avalon stabiliser on top i.e. on the right side seems to help stop the tunnelling but I have yet to soak them in water to remove this. As I have said they are only thermal vests, so they will have to do. Perhaps I was too ambitious in trying to coverstitch these as a first attempt - it is a steep learning curve though.
I am lucky in that I have another smaller overlocker, so I will leave the bigger/fancier one set up for coverstitch and come back to this again when further into my journey of discovering today's type of knits. This machine luckily lives in my sewing cabinet - the pull out side unit, so it is out of the way and thus not likely to get knocked, but I will leave several post it notes stuck on it saying what I have done in the way of changing things.