As far as war: fear is nowhere near the emotional response needed to end hostilities. Everybody is afraid in war. There are only two ways to end a war (in victory): attrition or subjugation. Look at the failed wars of the last century, see what they're missing? Actually, I can't really think of a war that was won through attrition... the western front of WWII maybe. Anyway, war is politics - when one side surrenders they have given into political threats to make the danger go away.

I'm a little surprised that I have to break it down this way, but try this: you are an Iraqi in occupied Fallujah. In one scenario the Americans only intentionally kill military aged males who openly engage them in firefights. You're afraid but you know the rules to the game and your will remains unbroken. In the second scenario the Americans publicly execute every military aged male they come across and rape every woman in your family, repeatedly on a random schedule. They capture you and torture you for days, then finally release you after they cut off your right arm. Also, they threaten to bury every Muslim killed in combat inside a dead pig - preventing them from entering heaven (as the British threatened back in the day in India). Also, piles of dead children are stacked and set fire on every street corner. This goes on for months. I'd argue that in the second scenario the population would effectively be terrorized, and your will to fight would be broken.

That is the original meaning of terrorism. What is called terrorism today is pretty much criminal activity, rebranded to justify feeding the military industrial complex. War isn't complicated by the way, it is just wrong. There is no need to tie your brain in knots trying to explain how children aren't 100% innocent in war :)