IMO the ROW are a last ditch method of resolving convergence, after common sense fails. Also, a legal method of assigning blame afterwards if there is an incident.
The common sense actions of both pilots in this situation are pretty clear. Pilot A continues on downwind, watches B, and prepares to adjust speed as necessary to facilitate merge. Pilot B makes a decision on sequencing and adjusts speed and heading to arrive in front of or behind A. Just like merging onto a highway from an on-ramp. Speed up or slow down to make it work.
The problem with fixating on B having the ROW is that B has more freedom to maneuver, being outside the pattern. He can easily S turn, change heading, or turn away from the pattern to reposition. You don't want aircraft A making unexpected maneuvers on downwind like a 360 or aggressive S turns. That is a recipe for a midair with aircraft C, which you must always assume is there. The whole point of the traffic pattern is that aircraft fly in a predictable PATTERN so everyone knows where to look to see and avoid.
IMO regardless of ROW regs, the prudent action is for aircraft in the pattern to fly the pattern, and aircraft arriving to sequence their entry so as not to disrupt the flow of traffic in the pattern.
Finally, ROW does not say aircraft A must sequence behind aircraft B. It says aircraft A must pass "well clear" of B if going over, under, or in front of B. So if A is a twin and B is a cub, it is consistent with the ROW reg for A to speed up and reach the merge point ahead of B. I would argue that makes far more sense than for the twin to pull in behind the cub and hang on his props at MCA.