...Is a good way to turn otherwise-skilled people with some problematic but fixable habits into people who refuse to work with you ever again.
Brutal honesty works with computers, but it's not always the best policy for keeping humans productive. Linus gets away with it because he's a celebrity, and moreover the right kind of celebrity. These comments would look very different if the public mockery was coming from, say, Steve Jobs.
He's been this way long before he was a celebrity coder. This is just how he runs Linux, and I think that is evidence enough that the process works for him.
The team itself might be a self-selecting group of people who can work with Linus. But, overall, I'd say that his brutal honesty works "well enough". It might not be a good way to run a corporate project, but for an OS kernel, the benevolent dictator model seems to work pretty well.
I wonder how the kernel groups at Apple and Microsoft work though... or how FreeBSD is organized... that'd be an interesting comparison.
Then again, a hard question is: Do we want developers with problematic habits working on the linux kernel?
I'd put the core linux system into a situation special enough to make it the correct decision to toss everyone but the best of the best of the linus-compatible developers out. It's not a pretty decision, but after a certain point of importance, I can understand that decision.
Brutal honesty works with computers, but it's not always the best policy for keeping humans productive. Linus gets away with it because he's a celebrity, and moreover the right kind of celebrity. These comments would look very different if the public mockery was coming from, say, Steve Jobs.