No matter how you justify it, this sux, and it sucks badly. However, under the circumstances, the Police actions were understandable. It doesn't take much of any jacket to cover a bomb belt or bomb vest. This is just a sad, sad tragedy, and he is a victim of the terrorists more than a victim of the police.
Once it got to the point of Menezes running in the train station, they really didn't have much choice.
The police screwed up pretty badly, though. Menezes lived in a small building (8 flats), and the cops could have, and should have, made sure they knew everybody who lived there. The start of this mess was when they started tailing a guy who came out of the building, who they didn't know. But Menezes had lived there for a long time, and they should have known who he was.
Bad legwork up front led to bad results downstream.