His teaching might not be relevant to those who are not the slightest bit interested in how he played, and how that influenced his compositions. But for those of us who are interested in such things, his writings are hugely relevant. Imposing modern concepts on old music is fraught with danger. Some aspects can be good, interesting, useful, but others can be ugly and baffling. I won't name names....
Let's look at what Aguado says - and I only have the English translation, which in itself is also a danger.
Arrastre: "A two-note slur can also be played with one finger only, and this is known as an arrastre. To make it easier the left hand must be turned appreciably towards the body of the guitar, and the arm must not move."
This can be interpreted a few ways. Sal, the OP, mentions moving his wrist, and can't stop the forearm moving. With respect, Sal, I think this is a wrong reading of the text. He seems to me to be suggesting the palm of the hand swivels to face the body of the guitar, rather than parallel to the fretboard. In doing so, the arm is not moving out of its position. He then goes on to say:
"The ascending arrastre is easy because the hand moves naturally towards the player's body; the descending arrastre is difficult because in playing it the hand moves diagonally and nearly horizontally away from the body in a line followed by the strings over all the area covered by the arrastre."
Again, not 100% clear. Given that these arrastre are shown to cover minor third distance and more, and his Lesson 36 over the page shows arrastre in 3rds, sixths and octaves. It's impossible to do these without moving the arm. I interpret his comment that "the arm must not move" as being related to the approach to playing the arrastre, the turning of the palm towards the body of the guitar. Once in a position, the arm must be engaged in moving from start note to end note, as outlined in the second quotation above.
I have no problem with this. All he seems to be saying is that it is easier to slide along a string if the palm is facing the body of the guitar, as opposed to the palm being parallel to the string.