Nothing spurs on a bully more than meekness.
First of all, I don't really advocate meekness to bullies, unless meekness to bullies is what is needed to save the lives of my loved ones. I'd probably agree with you that it is seldom the correct course. IMO, comparing terrorist to the kid at school who bullies other kids is overly simplistic, and just not helpful. In fact, it probably isn't even the slightest bit accurate in the world of analogies. Just as it isn't helpful to call every person who ever shoots at an American in anger w/o being conscripted into the military of a UN recognized nation a "terrorist", it probably isn't helpful to view every terrorist in the same light you view the kid who stole other kids lunch money in 2nd grade.
The two are not the same, all the armchair generals in every corner of America can chant in unison on sept 11 2005 "don't let bullies push us around!!!!", and the two will still not be the same.
Now Saddam, who was not a terrorist, but rather an "evil dictator", and in fact was looked down upon by the particular terrorist who were and are terrorizing America, was in fact a "bully", but let's be honest, no bully you or I ever encountered was like Saddam Insane. He is a bully in the way the baddest muffucka in the mafia is a bully. He is not a coward under his tough looking shell, he is evil and very brave and hard as carbide. Introspection and counselling won't help him. Further, his "bullying" was not directed at America, or really, anyone but his own people. And as I made the point on another thread, those people under him, did not ask for Americas help. In fact, they didn't even know they needed it. If you're a muslim living in an Najaf or where ever, and you hate Saddam Hussein, it does not mean that you naturally think of the US as the solution to all your problems. 50 caliber machine gun fire laying waste to your family, even though it was "collateral" to the military objective of GW Bush, will probably not convince you otherwise.