Baseball is interesting (and different from every other sport with 'lines', I'm pretty sure) in that the foul lines only explicitly determine whether a ball is fair or foul. They do NOT determine the path on which a runner must run, or serve as any sort of a boundary for a defensive player to engage with an offensive player or runner. I didn't look up the exact wording, but the 'baseline' a runner must follow is determined by where the runner is when he's engaged by the defense (ever seen a guy round 1st base and end up almost in right field before hitting second base?), and in some situations it's defined by intent, rather than position on the field. The latter is what you saw with Ellis. The "run past 1st base rule" says (paraphrasing) that if a runner is past 1st base, and makes an effort or signals intent to go to second base, then he's in play. His location on the field has zero bearing on that intent (i.e. the foul line is meaningless). The umpire ruled that Ellis had signaled his intent to go to second, and was then as such in play, and the tag out was valid. It's exactly equivalent to a runner tagging up on a long fly ball, deciding NOT to try and advance, and being tagged out trying to return to the original base.
I think the umpire mis-judged Ellis' intent, but it was a close enough play that I wouldn't have gotten myself ejected while I argued it. Looked like Pierce had the same read.