Difficult to make any judgement based solely on that video. I do however have faith that the British law enforcement agencies did view him as a credible threat before they shot him. The UK probably have some of the most stringent policies in the western world when it comes to shooting people dead on site. It's not something any British officer would do lightly, unlike the US (sorry to our US friends but we're nowhere near as trigger happy as you guys seem to be)
It'll be interesting to see how this story unfolds.
The heroes are the civilians who fought him unarmed before there were any police around, especially the first one in. There was a bloke there fighting him even while the suicide belt was known about, right up until the police peeled him off and shot the terrorist.
Even if I had the balls to fight a terrorist with a knife, once I saw that belt I'd be running.
What they need to do is to pass some strict "explosive vest" control laws. Make sure to throw in some "explosive vest" free zones while they are at it. That will prevent this sort of thing from happening in the future!