The question isn't really whether he should have beaten out Armstrong. The question is whether he should have beaten out Fyfe.
It's possible Fyfe beat him out, but Fyfe being listed as #2 doesn't necessarily mean that's the case when you're trying not to burn a redshirt.
It's really not a good move to preserve a redshirt on a kid who is your #2 best player at a position. In fact, it makes almost no sense whatsoever, unless you think you can't recruit.
It's a real FU to your current players, actually - especially the seniors.
I doubt that's what Riley did, though. My suspicion is that Fyfe beat him out. Whether that means he's bad is a different question. I doubt it. He's probably like 85% of HS QB recruits - not good enough to beat out a guy who's been in the program 5 years, even if that senior is a former walkon.