Stephen Walt has a great blog post up at ForeignPolicy.com.
I particularly appreciate how he recognizes that terrorists seek and profit from overreaction on the part of the victim state:
If our leaders react to every terrorist incident as if it's a monumental disaster, and if they hype the terrorist threat for political advantage -- as George Bush and Dick Cheney did -- the public will surely respond by demanding that we throw more resources at the problem than is prudent. Getting the opponent to react in foolish and self-defeating ways is one of the primary goals of most terror campaigns, of course, because these blunders can help the terrorists win victories that they could not achieve otherwise. We did more damage to ourselves when we invaded Iraq than Osama bin Laden accomplished on 9/11, and an open-ended commitment in Central Asia could easily compound that error.
You don't have to believe that the Bush Administration wrongly sought political advantage - they may have believed the hype or believed that hyping threats was good policy - to recognize that hyping terror threats advances terrorists' goals and damages our own interests.