It is moot. One cannot argue on that.

With B), blue's only choice is to move back. If it doesn't, red is confused (if being driven back) or is destroyed (if it's retreated from combat).
By "back" here, do you mean the direction in which the unit moves or the type of making way (aside/back)?
If direction – then I agree.
If type of making way – then I think the move is not valid, because blue has to move in the same direction as the red unit.
Now to the bit of rules (I know it's playing with words and implying, but how else to analyze text):
Is it the red unit (driven back) or the blue unit (making way) that would force yellow to make way?
My thinking process with 2 options:
1) The decisions of making / not making way are subsequent:
1a) Red unit is driven back. Path is set.
1b) Blue unit decides to make way. Path is set.
1c) Yellow unit decides if it makes way or not. It doesn't.
1d) Blue unit cannot move along the designed path. It is confused.
1e) Red unit cannot move along the designed path. It is confused.
2) The decision is made at the same time and then the paths are set.
2a) Red unit is driven back. Path is set.
2b) Blue unit decides to make way.
2c) Yellow unit decides not to make way.
2d) Path for the blue unit is set.
2e) Blue unit moved.
2f) Red unit moves.
As neither of those is written in the rules, what bit of rules in the Make Way section of the rules decides?
I think it could be the "Who is making the units to make way?"
If each of the units causes the next one to make way, it is A (subsequent decisions).
If the red (driven back) unit causes all of the units to make way, then it is B (the decisions are made at the same time).
According to this piece of rules, it is the red unit.

I know it's not described in the rules. But then, the rules cannot describe every possible scenario.
The following two bits of rules could mean that the blue unit cannot move. But I don't think so.
"A unit forced against unyielding friends halts on contact and becomes confused."
I think a unit making way is not forced to move into the yielding one. It's intentional move.
Units that are engaged in combat, constricted by terrain or unable to move for whatever reason cannot make way.
None of the conditions mentioned applies to the blue unit.
So I found suggestions that it can choose to move back, but none that it cannot.