I haven't encountered something similar and I have to admit it sounds like an extraordinary situation!

However, playing for the flag should be declared a draw as far as I know! So, the arbiter was right!

Thats completely cheating so what if it was drawn if the other guy was trying to win off time that fine cause if it is truly drawn then the guy who was behind on time shjould have forced repetion or played on into the 50 move or somethin as reasonable as that seems thats completely unfair for the TD to do that. 

I disagree! Playing for time in an equal position is immediate draw! No matter anything else!

I disagree with this as well, if the game is clearly drawn and one plyer is just trying to run the other out of time and can make no progress or is not even trying to make any progress then the TD is well within his rights to declare the game a draw.If you try to flag an opponent in this situation then you are just out for a cheap win. 

The correct ruling is draw. Too many people see the clock as official and inseparably connected to chess, almost like a sports clock. In American football, if one second remains, the trailing team has every right to do what they can to try to win the game.

But in chess, the clock is intended only to regulate the flow of the game, not supersede the true objective. The goal of chess is checkmate. Since the player described above was not pursuing checkmate, the TD was correct in his action.

Though not exactly the same thing, I did actually have something happen to me in which I was disqualified about halfway through a tournament.  I was playing 1st board for my team in the junior high team championships here in Michigan (which allowed players up to and including 9th grade).  The rules at the time were that all of the players on the team had to attend school in the same building (I think to prevent huge school districts from forming a super-team from their various schools).  I was in 8th grade at the time and I attended four classes at the middle school (which was 6th-8th grade) and two at the high school.  Our thoughts entering the tournament were that I attended class at the high school (and we only had one middle school and one high school), so thus I could play with the other members our team, who were all in 9th grade (and some of whom were in my high school classes).

About halfway through the tournament, someone or another (not sure who exactly - we never found out though we had some suspects) complained to the tournament director.  He decided that I was not qualified to play with the other players, but we appealed the decision (which under the rules here we could do) to some members of the state board who happened to be present.  They ruled 2-1 against my continued play on the basis that I only attended the high school a minority of the time and thus I officially "belonged" to the middle school.  The one person ruling in my favor stated that he thought we made an honest attempt to abide by the rules so he saw no reason to force my disqualification.  Therefore, my previously played games were adjusted to zeros for the purpose of the tournament, our other players had to play up a board, and I got to play unrated games against the bottom board player of the teams we played in the last couple rounds (which, as you might imagine, was a bit boring and not really how I wanted to finish).

It was not that long after this occured that I believe the rules were rewritten to be more clear about who eligible members of a team were.  I should also note, that while we were never certain of who complained about this, we were fairly suspicious of one team in particular who, oddly enough, had a "home schooled" player playing with their 9th graders (who were in the high school) that year and then their middle school players the next year (which obviously means at least one of the two years he was not eligible).

In order to put a end to a drawn game, there is the 50-move rule. 

Cite from Wikipedia (http://en.wikipedia.org/wiki/Fifty-move_rule):

"The fifty-move rule in chess states that a player can claim a draw if no capture has been made and no pawn has been moved in the last fifty consecutive moves (fifty moves by each side). The intended reason for the rule is so that a player with no chance to win cannot be obstinate and play on indefinitely (Hooper & Whyld 1992:134), or seek a win purely due to an opponent's fatigue. All of the basic checkmates can be accomplished in well under fifty moves."

If a player follows all the rules, he should not be stopped!

In this example what rule did he not follow?

It's called insufficient losing chances, for those of you who haven't played tournament chess.  The arbiter was correct.

Ozzie makes a good comment, although once every two dozen moves is a bit extreme IMO lol.

All of which is off topic :p  I've never seen someone ejected.

dragging this topic back up - if this game were to be played under USCF rules, this would have been a violation of the rules I think.  Someone correct me if I am wrong, but the TD can observe but not make any ruling unless there is a claim from one of the two players.  In this case, he or she probably should have been counting moves but could not make a ruling.  Similarly in the US, a TD cannot stop a clock - the players must, which I think is different thatn FIDE rules.

At the Mechanics Institute in San Francisco a couple of years ago, there was a game between a couple of 1600'ish players, a high school kid and an adult that was getting back into OTB play after not having played for many years.  The position was a dead draw - opposite colored bishops; the high school kid had an extra pawn but the king was blocking the pawn with no way for the bishop to budge the king. In essence, both players were moving their bishops around.  The adult did not know about the 50 move rule or 3 fold repitition or any other claim.  The TD, Anthony Corrales, was there watching the whole time.  After the adult guy's clock ran out, he then turned around to Anthony and claimed a draw by insufficient losing chances, but by then it was too late.  Anthony then made a stirring speech the next round, directed at the high school kid, but spoken to everyone, about chess being a gentlemanly sport and not a cutthroat sport.