"All that is required for evil to fester is for good people to turn the other way."
I'm sorry but while you may have wanted to "stay out" to me the only proper course of action would be to point out the play error and perhaps do a little educating. Maybe they wouldn't have listened but perhaps they may have said "Oh, so that is how you are supposed to play it? I guess we've always been doing it incorrectly."
It also really chaps my hide when someone is making erroneous rules claims when it benefits himself. It is one thing if you find your template "going off the edge" and then believe that ship is destroyed but to me it is completely different when your opponent's template "goes off the edge" and then you tell him that his ship has left the field. One is you penalizing yourself and the other is you punishing an opponent for not standing up to your erroneous ruling. In a game between newbies, especially newbies, you should provide proper rule support whenever possible as it can help curb a rude awakening later when they find out they've been doing something wrong the whole time and it is now biting them when it matters.