So, I finally beat Armstrong, and all the health drops actually happen but the final Blade Mode trigger needed to be running.
But the only way I could get this to work was 800x600 on windows mode. Why? I wish to know technically what's happening that this is the reason it works.
This isn't the worst port in the world, just weird how people are finding work arounds. Like rubbing cheetah blood across their video cards. Because if feels like flipping switches and hope something works.