I've seen this issue come up at least 2 times before.
There are several ideas about what a terrorist is or is not floating around. This probably comes from there being no seasoned real world definition of terrorism. The word we use today is so full of propoganda and spin that we can't even role play it correctly. "One man's terrorist is another's freedom fighter," some would say. Still others would say would do something creative or deceptive like declare war on terrorism, as if that were even possible.
I would suggest allowing terrorists to KOS anyone using an ID of their sworn enemy, found on their infocard. In any other situation I would say some sort of extortion should be involved before shooting (demand money, demand prisoners, take hostages, execute hostages one by one until ransome recieved etc. etc.) For example Prospector the Xeno can shoot Tex the Junker any time he feels like it without having to say a word. However if Prospector wants to take another field trip to Kusari to shoot at the ambassador, he must demand prisoners or whatnot (which he actually did anyways, the Patrick fella he wanted released from prison,) then start shooting.
Allowing any player on a server to shoot without preamble or condition anyone else they see is asking for trouble. This sort of liberty has led to more than one flame out concerning the Phantoms. I'm very happy to see Caylith back in the fold, but she nearly left us and I think it was spawned due in part to this issue. I love the Phantoms, they are a joy to fight and role play with and never abuse their autonomy from what I can see. But other people are using that ID now, and they aren't Phantoms...