So, you get half the oxygen needed and somehow doing so doesn't cause hypoxia, which means “deficiency in the amount of oxygen reaching the tissues”?

You don't get half the oxygen. You get as much oxygen as you would during normal calm breathing, which is pretty shallow. Basically, you take a normal breath, which is about 50% lung volume, and then fill your lung up to max capacity with n2o.

But you know what? Pulse oximeters are pretty cheap nowadays. Try it for yourself.