In live action, I thought it was offside because Sigurdsson's position and his effort to pull his legs toward his body constituted gaining an advantage (i.e. he knew he was in the way of the ball, or very close to it). Watching the replay behind the goal confirmed my initial opinion. I can see why others disagree, but I think this is one of those instances where not overthinking all of the potential issues makes the call somewhat simple.
That being said, this is absolutely the kind of play where Kavanagh would have been well-served by going to the monitor himself. First, he would have had angles of the play that he didn't have on the field to render a final decision. Second, on a play that decided the game, he could then see for himself and be able to explain his final decision. I felt for him as he sent off Ancelotti. I know he's the referee and has final say, but the optics of having VAR in his ear giving him advice without him doing an on-field review just looks bad. In every other competition using VAR, Kavanagh would have seen the play himself and used that information to make a final call.
I wish PGMOL would take this play as the final straw breaking the camel's back for allowing referees to review monitors. Kavanagh might have still reversed the on-field call, but he at least could have explained what he saw to Ancelotti. There might have still been a send-off, but at least it would have been an argument based on what Chris Kavanagh saw and ruled upon with his own eyes as opposed to relying sight unseen what Jon Moss was telling him from Stockley Park.