You're quite right about that. Chen is playing a dangerous game of poker, but he doesn't hold the cards he thinks he does.
That's the problem. He's not playing the hand he was dealt. He is theatrically and obviously pulling an ace out of our hand, and daring both Beijing and Washington to call him on it.
That military ace is a very high card. We never want anyone to use it for their own purpose, but we wanted Taiwan to win anyway, and we sure as hell don't want to risk letting anyone top it. Still, we don't really want to fight China, if we can avoid it. We're tired of fighting as it is, and our fights have been very easy compared to what China can muster.
On the other hand, Beijing doesn't want to challenge this play, but their reputation and livelihood as a serious player is at stake. If they don't do something, even something stupid, then they're done in this line of work. No one will ever take them seriously again. That doesn't leave them a lot of options, though. They may not be as good as us in a fight, but they may not need to be to stand up to us credibly.
Also, there's a lot of folks at the table, and at the bar, who are going to closely watch what happens.
It would make an interesting scene from a movie, that's for sure.