Yo, a lot of time and effort went into that scene, and I think it's actually better than the theatrical version ("The more contact I have with humans, the more I learn").
Compare this scene to the scene in T3 where Terminator cuts away its torso to remove a power cell (now that was silly!) and this scene is so much cooler.
I don't think the scene was cheap at all. What makes it seem cheap to you? How can you not believe there is an endo-skeleton underneath it's skin when he rips off the skin?
I suppose cutting the chest isn't as effective as an arm or eye (T1), but what else is there to do when all the good stuff had been done?
I don't know how you can say it was lacking realism? I mean the skin was cut and torn off. If you expected the Terminator to bleed to death then I would agree it was lacking realism.