My interpretation is that they made him a remorseless psycho to make the ending to GOW3 all the more surprising.
Also remember he said "My vengeance ends now" before doing it which could mean he realized what his selfishness was doing to the world and wanted to end it all.
As for the 1st person sequence, I think that was just for the player to unleash frustration, b/c it only stops when you stop pressing circle.
He learned that he had hope trapped inside him and that humankind needed it more than he. So he killed himself with the sword to release hope to mankind.
Also remember he said "My vengeance ends now" before doing it which could mean he realized what his selfishness was doing to the world and wanted to end it all.
As for the 1st person sequence, I think that was just for the player to unleash frustration, b/c it only stops when you stop pressing circle.