It's a really nice scene on an action level, but it makes absolutely no sense as far as I can tell.
How does this thing work that it starts malfunctioning by saying the same phrase over and over? Is Arnold's character talking through it, or is he just wearing it?
There's also the glowing light rod thingie connected to the ear that would penetrate Arnold's head if he was really wearing it.
And finally, it starts working again at the end, since it's obviously programmed for an ironic self-destruct mode.
Of course it all makes sense if Arnold is inside a virtual world all along...