My reading of Joy's paper —just as it is, without having carefully read the arXiv paper I cited, nor all of Joy's responses to critics that I also mentioned— is, so far: the left and right hand sides of eq(1) and eq(2), without the central interpolations, state that $A(\mathbf{a},\lambda)=\lambda$ and $B(\mathbf{b},\lambda)=-\lambda$, where $\lambda$ takes the values $\pm 1$. $A(\mathbf{a},\lambda)$ and $B(\mathbf{b},\lambda)$ are independent of $\mathbf{a}$ and $\mathbf{b}$, respectively, hence the expected value of the product is $-1$.
The central interpolations introduce nine algebraic objects, each of which is the basis of and satisfies the algebraic relations of a quaternion algebra, $\beta_i$ and $\beta_{i'}(\lambda)$, with $\lambda=\pm 1$. For $\lambda=+1$, the $\beta_{i'}(+1)$ satisfy the same algebra as the $\beta_i$; for $\lambda=-1$, $-\beta_{i'}(-1)$ satisfy the same quaternion algebra, with the sign change to be noted. To fix the algebraic structure further, which is absolutely necessary so we know how to handle products like $\beta_i\beta_{i'}(+1)$, Joy states that $\beta_{i}(\lambda)=\lambda\beta_i$, so we are in fact dealing with a purely quaternion algebra, of real dimension 4. The whole of the prelude to eq(5-7) could be stated using only $\beta_i$; for me the $\beta_i(\lambda)$ just obscures things. I would like to see a mathematical justification for introducing the $\beta_i(\lambda)$ instead of just using $\lambda\beta_i$.
The notation of eq(5-7) is problematic because it seems to play fast and loose with the non-commutative structure of the quaternions. One cannot in general write $\frac{p}{q}$ for two quaternions $p$ and $q$, because in general $pq^{-1}$ is different from $q^{-1}p$. Since eq(5-7) obtains a different result from the result that I get in my first paragraph, I'd want to see the whole thing rewritten using inverses so that the order of the multiplications is kept under control. Unless there is a potent reason for using the $\beta_{i'}(\lambda)$ notation, I'd like to see everything written out using only the $\beta_i$. If the answer is still $-\mathbf{a.b}$ I'd want to check that it does not make any unwarranted reversal of the quaternions $a_i\beta_i$ and $b_i\beta_i$, even one of which would be exactly enough to get the result $-\mathbf{a.b}$ instead of $-1$.
I currently cannot see any way to justify the jump from the left hand expression of eq(6) to the right hand expression. Perhaps someone can show me how to get from one to the other.
If my discussion above is OK, this leaves questions about Joy's earlier papers. My impression is that Joy tried to make the argument of his earlier papers as succinct as possible. He may have made a mistake in doing so, in which case, if he claims the earlier papers do not make any mistake, then they have to be considered on their own merits. On the other hand, before I would consider checking that I think I would want to see Joy withdraw or replace this paper on the arXiv with something that at least made play at addressing my discussion here.
Finally, I look forward to comments.