It was the correct result, but the umpire's reasoning is strictly his own. There is no requirement for the retired runner to abandon his efforts to reach a base and cannot just go "poof" and disappear into thin air the second the out is made.
Going over the batter's head has NEVER been a faction in whether a ball could be caught for an out or not. The previous rule only stated that a ball which was over the batter's head could NOT be a foul tip.
If this was a foul tip, and it doesn't sound like it, there is no out. Then again any "caught" ball cannot be a "dead ball foul".
I gotta disagree with you for once. The runner can't go poof into thin air, but he is OBLIGATED not to crash into the fielder. He is also obligated to allow the fielder to have a clear path to attempt the double play.
Rule 8, Section 7, paragraph P says:
"When, after being declared out or after scoring, an offensive player interferes
with a defensive player’s opportunity to make a play on another runner.
EFFECT: The ball is dead. The runner closest to home plate at the time of the
interference is out. All runners not out must return to the last base touched
at the time of the interference."
Also there is a whole section on crashing into the runner. Rules of Emphasis 13 says:" to make a play on a runner, a runner must be called out when they remain on their feet and crash into a defensive player who is holding the ball and waiting to apply a tag. To prevent the out ruling, the runner may slide, jump over the defender holding the ball, go around the defender or return to the previous base touched. If the act is determined to be flagrant, the offender is ejected. A runner may slide into the fielder."
Now that specifically mentions running into a fielder applying the tag, but paragraph C of that some ROE says: "C. When a crash occurs after the runner is called out, the runner closest
to home plate is also out. Rule 8, Section 7 P."
It even sites 8,7,P as the reference. Going by what the OP said, the runner was out and crashed into the fielder attempting to make the double play throw. That sounds like interference to me.
The definition of interference is: " INTERFERENCE: The act of an offensive player or team member, umpire or spectator that impedes, hinders, or confuses a defensive player attempting to execute a play. Contact is not necessary." Contact isn't even necessary but in this case we even have the contact.
If the throw draws him into the runner thats one thing, but this sounds like the runner didn't slide and crashed into the SS after he was already put out. He doesn't have to go poof, but he can't impede the SS from making a play on another runner. Sliding, going around or avoiding the fielder all fit the bill without him having to go poof.