It's kind of funny the same thing is happening in Finnish, although since "terrorist" (terroristi) and "terrorism" (terrorismi) are loan word, the basic word "terror" shouldn't be used in the first place as there's the normal, old word for terror/horror existing just fine. Yet, "terror" has been also mutilated into terrori in Finnish and is used precisely the way you are complaining about. I bet that word started to be used after somebody in the English world (was it Bush, then?) began to use "terror" in that erroneous way.
Of course our situation is less troublesome, even if no less stupid, because terrori wasn't a part of our vocabulary originally and thus it refers to nothing but terrorism. Maybe this will cause the English language also to restrict the word "terror" to things that are linked to terrorism only, leaving horror/dread/etc for other, general things.