Ermm. It depends.
This all changed a few years back and I will try and clarify so please bear with me.
In your scenario where is the ball? Also remember that no lineout player can leave the line out until it is over (ball leaves the Line of Touch).
Options.
1. Ball thrown in, Red catch the ball and set up by binding on to the catcher but the ball remains at the front. Blue options are to tackle the ball carrier or - in your scenario - step apart. In which case there is no offside/obstruction and red can trundle up the park until they either score or Blue tackle the front of the 'tortoise' (to use a Roman Legion analogy)
2. Ball thrown in, Red catch the ball and set up by binding on, but the ball is transferred - player by player - to the back. Blue do not engage and do not leave the line out. Referee calls "No Engage; Use it!!" If red do not use it then there is a scrum turn over with Blue throwing in the ball. However, on a second and subsequent occasions that Red do not 'Use it!" the sanction is a PK to Blue - 15m in
3. Ball thrown in, Red catch the ball and set up by binding on, but the ball is transferred - player by player - to the back. Blue player runs round and tackles the hind most player (ball carrier). PK to RED for Blue leaving the LoT before the line out has finished.
4. Ball thrown in, Red catch the ball and set up by binding on, but the ball is transferred - player by player - to the back. Red player at the front reaches out and tries to grab a Blue player to form a Maul. Don't get fooled by this action by Red. Still no Maul as the Blue team have elected not to engage.
Blue MUST NOT leave the LoT but need to 'part the curtains' by staying between the 5m and 15m lines.
Hope this all helps?
If you PM me I have a load of video clips that were issued at the time