This is described as a joint AR/VR device. I don’t expect we’d be totally cut off, probably more like an overlay of computery stuff while still being able to see the real world behind it. Sort of like a virtual screen.
Correct, it sounds like they are getting the AR using a 'passthrough' mode stitched together from the multiple cameras and some sensor fusion to give you an eye-level perspective live video feed they can manipulate with all manner of neat effects.
Wearing an HMD is always going to disconnect your attention from where you are and teleport it to someplace not shared by those around you, there is no way around that and it's not a bug either. AR just makes that separation a little fuzzier.
The real challenge, is going to be some way to not look like a dork while using it in public. If I had to have faith in anyone to design something that could square that circle it would be Apple (and maybe Sony). But it's a tall order.
Of course, inputs are weird too. Would it need to come with a pocketable keyboard or something?
Wearing an HMD is always going to disconnect your attention from where you are and teleport it to someplace not shared by those around you, there is no way around that and it's not a bug either. AR just makes that separation a little fuzzier.