If the NDS arm is contacting the cup then the taper must also be nearly bottoming out to the bolt head.

This sounds like the arm may have been installed using grease where none should be used (on the tapers). I clearly recall that Stronglight's dealers such as Wheelsmith warned customers against using grease on these lightweight crank's tapers back in the day.

At what bolt torque level does the arm begin to rub on the cup?

If it begins rubbing on the cup before much torque has been applied, the taper must really be shot.
But if the bolt can be torqued somewhat well before the arm contacts the cup, then some metal can be shaved off of the arm to gain needed clearance at the cup. Some metal could also be shaved off of the face of the cup using a belt sander (the chrome will ruin a file).
If the torque level is still needing to be on the low side, then the bolt should be installed using blue LocTite on the threads.
Remember that the arm will move inward slightly during the first ride after tightening the bolt.
If the bolt bottoms on the end of the spindle after the arm has been relieved then at least the bolt can be fully torqued, and the spindle end can also be ground a bit shorter.


One last check would be to confirm that the ball bearings are exactly 1/4" in diameter.