In preface, I offer condolences to the family of the man killed by the Brit's the other day.
With that said, everything he did suggests that the police acted correctly by taking direct and decisive action against him. As it turns out, he wasn't who they had reasonable belief to believe he was, which is unfortunate. However, had he turned out to be one of the loose bombers the police were looking for, and they'd allowed him to set off another bomb, then there would certainly be cries of "Police Incompetence". This case of mistaken identity is an unfortunate byproduct of his behavior's resemblance to that of the "Asians" who have lately taken to blowing up British mass transit.
Of course, as usual, Froggy is right about all this.
Update: Just to remind everyone of the importance of differentiating between this guy's behavior and his skin coloring, I offer three words: John. Walker. Lyndh.