(I'm gaining valuable technical advice here from one of the resident felines who always takes a keen interest in, well, just about anything that goes on.)
I've been messing with this sweater for over two weeks. I attempted to felt it, only to find that it must be some sort of unfeltable blend. I attempted to wet it down and stretch it out to relax the knit. As it dried, it shrunk right back to it's original form. I tried further disassembly and rearranging the components into something remotely flattering; multiple combinations were attempted without an inkling of success. Sometimes it's just better to admit defeat, so I finally gave up and made a shrug out of the sleeves. The rest of the sweater will get used for something, but not something to wear.
These instructions apply to stitched in raglan sleeve styles. Click the photos above for larger versions.
Carefully remove the sleeves from the sweater by ripping out the connecting stiches.
Try one sleeve on and guesstimate how much you want to remove from the former shoulder area of the sleeve.
Baste the two sleeves together where the "back" seam will be and try on to see if you like the fit. Adjust as necessary.
Very carefully unravel the knitting to remove the desired amount from the former shoulder area of each sleeve. If you are working with a fine gauge sweater, you can just cut the excess fabric off (make sure you finish the raw edges somehow to prevent raveling later).
Being careful to preserve and stitch through the "open" loops on the raw edges of the sleeves, stitch the two sleeves together at the back seam with some of the matching yarn from the unraveling.
This is a very simple and easy project (provided the unraveling step doesn't get out of hand).
The only thing I'm not happy with is that there is a little bit of a bulge in the back. I don't think this would have happened if the shrug had been a little less snug. Everything about the original sweater was huge, except the sleeves. I'd like to try this again with some sleeves that are a bit roomier.