At the time, Atari were very keen to fund 'unusual' game concepts, such as "Toobin'
" and Beat Head was one of those chosen. However, the game mechanic was incredibly repetitive and once you'd beaten 5 opponents, not much really changed. The reason for the very limited number of 'waves' is that the game did not get past a 'short field-test' stage. It was intended to be out only a few days. Atari had a pretty bad rep in those days, which showed in the cash box. And Beat Head had fairly powerful enemies within Atari, so it was killed at a very preliminary stage of the program. It certainly was never intended to be so limited.
The phrase 'Stella on Steroids' on the POST screen is a reference to the old Atari VCS, codenamed 'Stella'.