Materials:

2 LED tap lights(1-2 dollars a piece)
Electrical Wire (took from school, can be purchased though)
Water Bottle(1 dollar)
10 bright white LEDs (I took mine out of a flashlight which was 2 dollars)
Tap filter
Mason jar cap
Thin cardboard/Bristol board
Metal Rebar (around 10 dollars)
Metal towing cable (enough to reach your wrist to your chest twice 2 dollars[probably less])
Gardening glove(although could be any glove really mine were 2 dollars)
Pipe cover(2-3 dollars)
Jar with deep top(or anything of the sort, all we really want is the top)

Equipement:
Wire cutters/strippers
Soldering gun/solder
Red/Silver Spraypaint
glue gun

Pardon the lack of step by step imaging. I did not think to create an instructable until after I had made it.

Step 1: Arc Reactor

Drill 10 evenly spaced holes in the pipe cover big enough for an LED to stick through.

Dismantle the tap light without damaging the circuit board, reflective piece or plastic lens.

Remove the wire connecting the battery housing and the circuit board. Soldering on new wires long enough to go from your chest to a pocket. Keeping the battery housing out of the chest helps make it thinner.

Solder wire onto the tap light circuit board in parallel. To find the right spot simply touch the wires from an LED onto parts of the tap light board to see where it will turn on. Make sure to try this while it is turned on and off, because if you do it in the wrong spot it could create a short circuit which will bypass the switch, which will mean the LEDs will always be on.

Solder 10 LEDs in parallel with each other, they will run off the same power supply as the tap light.
I got my LEDs from flashlights, because I had several and they were cheap. However, soldering wire to the tiny leads on the LEDs was a pain so you may wish to take that into consideration.

Place an LED in each of the holes. Use hot glue(glue gun) to keep them in place.

Cut the water bottle at the bottom. Cut out a hole in the middle of the bottom which you just cut out. My soldering gun has a cutting piece meant for acrylic tiles, so I used that to cut out the hole. To cut of the bottom I just used a saw, but be careful not to crack the bottle.

Cut 10 piece of wire. Strip them. Wrap them evenly around the plastic ring. Use glue on the back on the to keep them in place if need be.

Drill holes all around the edge of the mason jar lid. Cut a hole in the middle of the mason jar lid. Spray paint it silver.

Glue the tap light lens and reflective piece to the hole in the center of the pipe cover. Glue the tap filter onto the front of the plastic lens.

Glue the mason jar cap around the tap light lens, on the pipe cover.

Glue the wire-wrapped water bottle bottom, over the LEDs, onto the pipe cover.

Place the whole thing inside the jar lid and you are done.
The arc reactor needs to be able to move freely inside the jar lid in order to press the tap light switch.

In order to wear the arc reactor I decided to wear two under shirts(wife beaters). The bottom one had a lower neck than the top one. So I glued two hooks onto the back of the jar lid and it would simply hook onto the neck of the bottom under shirt. The top shirt would hold the arc reactor inside the jar lid.

Step 2: Repulsor Arm

If your glove is already red, then perfect. Otherwise paint it red. I suppose a fabric paint or dye would work best, but I just spray painted it. Most of the glove will be covered anyways. I did it to my left hand because I am right handed and wanted to still be able to do things. The glove really limits the use of your hand.

Cut a hole in the palm big enough for the tap light LEDs to fit through. Glue the reflective piece and the lens onto the palm. Tape the tap light circuit into the inside of the palm.

For the "paper craft" part, I followed this video(infact the whole idea for the glove I got from this, I did not come up with it myself):
http://www.indymogul.com/backyardfx/post/17481/papercaft-for-the-iron-man-repulsor-arm

However, I did not to the entire arm, I just did the glove part. I hid the battery housing inside the "wrist guard" on the back of the hand.

Although it was not intentional, my glove ended up allowing my to activate the tap light just by straightening my hand, this may have been a fluke though but at the very least you should be able to press it with your fingers.

For the forearm I went with a metal frame with wiring.

First bend two rings from the metal rebar. One to fit around your wrist, and one around your upper forearm. make sure the write ring is big enough to fit your hand through since this part is meant to slide onto your arm.

Then cut a piece of rebar the length of your forearm.

I used metalwork solder to attack this piece of rebar to the two rings, however a strong glue could work as well.

Wrap wire up and down the forearm piece. This wire is aesthetic only. Put as much wire as you want until you think it looks good enough.

Now attach the towing cable to the inside of the arm piece. It is meant to go from the wrist to the chest. It is intended to imitate the cable bringing power from the arc reactor to the glove. Of course it is aesthetic only, it carries no power.

Step 3: Bonus: Jacket

Because I live in Canada, it is cold on Halloween. I could be walking around outside in an undershirt, so last minute(ish) I decided to try and make a jacket I had look similar to Tony Stark's racing jacket from iron man 2.

The jacket I had was already racingish style, maybe more snowmobile I don't know.

The jacket in the move is blue and black, but I wasn't too concerned.

To make the letters I just bought black and white felt(actually I got fleece because it was on sale) from a fabric wholesaler. Here we have fabric land, but I am sure there are others, or maybe a craft store would carry felt.

First I used Bristol board to draw and but the letters, then I glued the cardboard letter backward onto the white fabric.
I cut out the letter as close to the cardboard as possible.

Then I glued the cut out cardboard side down onto the black fabric. I then cut it out leaving a black boarder sticking out. The reason I have the Bristol board letter in there is not only help with the cutting, but it makes the letters a little more rigid which is easier to work with.

I sewed the letters onto the jacket on the black part using black thread so you cannot see the stitching(which is pretty poor, I am no seamstress, or seamster I guess it would be).

I think it turned out alright. You need to keep in mind that the A goes over the zipper, so it is loose on one side. This is another reason why the Bristol board making it rigid is good.