THE LAST ACTION HERO (Directed by John McTiernan. Starring Arnold Schwarzenegger, Austin O'Brien, F. Murray Abrahams, Charles Dance, Mercedes Ruehl)

Given the lukewarm reception that has greeted Big Arnold's latest would-be-blockbuster, The Last Action Hero may actually represent the last time the action hero resorts to PG-rated comedy.

The dubious premise of the title is that Hamlet (despite the self-paralysis of indecision that permeates the play) was the first action hero. In one of the film's better in-jokes, Laurence Olivier's widow, Joan Plowright, appears as a school teacher introducing a showing of his '50's version of Hamlet to her class and painfully suggesting they might recognise Olivier as Zeus in Clash Of The Titans. Bored during the screening, 11-year-old Arnie fan Danny Madigan (Austin O'Brien) fantasises that Schwarzenegger is playing Hamlet. Of course, the Austrian Terminator does not have quite the same versatility as that other action hero, Mel Gibson. "To be or not to be?" ponders Arnie, before quickly concluding "Not to be!" and launching a grenade attack on Elsinore.

It's a long way from Shakespeare to Shane Black (co-scriptwriter and also author of those other modern classics, Lethal Weapon and The Last Boy Scout) but perhaps Arnie should have thought more about the Hamlet connection. When the Prince of Denmark finally does take action, he (and just about everybody else) gets killed. Well, Arnie just had his butt kicked at the box office by a dinosaur (Jurassic Park - $200 million, The Last Action Hero - $40 million). That's what you get for trying to be clever.

There is something about the whole conceit of The Last Action Hero that should have had film executives screaming "Not to be!" from the very start. A boy living in squalid single parent circumstances in New York gets transported by a magical cinema ticket into the movie world of his hero, Jack Slater, a character played in a successful series of films by Arnold Schwarzenegger. When the film's villain (Charles Dance) steals the ticket and escapes back to the, er, real world, Slater follows, where he must come to terms with the fact that he doesn't really exist before saving civilisation as we know it. Or something like that. Arnie always has to deal with some crisis or other, but you never thought it would be an existential one!

The Last Action Hero's central theme is the gap between fiction and reality, but the film is skewed heavily towards fiction of a very facile kind, serving itself up as a full scale action entertainment with self-mocking humour. The result is a complete hodge podge, less like Fellini's 81/2 with added explosions than Naked Gun 21/2 with less jokes.

Director John McTiernan never achieves the delicate balance between fantasy and reality, or between satire and pastiche, that would be required to pull this off. But then he is patently the wrong man for the job. Delicate is not a word you would apply to the director of Predator, Die Hard and The Hunt For Red October. And a sense of humour is not something you would be unlikely to ascribe to the man responsible for the failed romantic comedy Medicine Man.

One might at least have expected some genuine thrills but McTiernan's movie within the movie is more reminiscent of the recent National Lampoon's Loaded Weapon than the Lethal Weapon series both are spoofing. They even share some of the same jokes (the fast talking chief with smoke coming out of his ears) and stars (F. Murray Abrahams makes villainous appearances), and both are loaded with in-jokey cameos (in Action Hero, T2 Robert Patrick escorts Sharon Stone in that dress out of the police station). But where Loaded Weapon was hell bent on out and out silliness, Action Hero needs to play it closer to the genuine article in order to inject a sense of jeopardy into proceedings. It is hard to get involved in your hero's plight when the longest action sequence in the film is built around an extended fart joke.

Schwarzenegger's obsession, and perhaps his achilles heel, is with demographics. He has tried to broaden his appeal by making a PG rated film that young children could see, while filling it with enough wit and action to keep his older audience. But the highest paid star in motion picture history - Mr Blockbuster, the original self-made superstar - has got his equation wrong this time. Rife with in-jokes and a kind of perverse egomania (there is something wrong with the very idea of spending $80 million making a film in which you satirise yourself) The Last Action Hero is simply stupid, even when it is being clever. The climax makes references to Ingmar Bergman, who the target audience will probably think is an actress their grandfather used to like, while anyone interested in Bergman is unlikely to find much to amuse them here.

And yet, despite all its fundamental flaws, The Last Action Hero may actually be Arnie's finest performance. With his accent and his muscles The Big A has never been perceived as a real human being. Playing a fictional creation struggling with the idea of reality gives him a dimension that he usually lacks. His performance is almost poignant, and never more so than when the fictional Jack Slater character meets the real life Arnie, who portrays himself as a glorified salesman, always promoting his products and ready to cut a deal. Schwarzenegger suggests Slater could double as him for supermarket openings but Slater spurns his real life counterpart, snapping bitterly, "You have brought me nothing but pain!" Ah, the irony. Of course, you can't help but feel that Arnie thinks irony would be a good adjective with which to describe his muscles.

There is a sense of madness to The Last Action Hero that is almost endearing. Young children will probably love it, film buffs should enjoy its internal references and anyone who liked Hudson Hawk might think it a masterpiece (in fact I liked Hudson Hawk, but there's no accounting for taste). The rest will probably concur with Jack Slater's catchphrase, uttered threateningly with those thick Austrian vowels: "Biiiiiig mistake!" Shakespeare himself couldn't have put it better.