The specific question of is terrorism working in Iraq is more relevant. There, the terrorist's goals is to return to Ba'ath rule, and that isn't going to happen. The other goal is to have the US withdraw from Iraq. Ironically, if they'd stop blowing things up, we'd leave. So in that specific case, no it doesn't appear to be working.
"Why do the media, both reporters and analysts, treat terrorism as if its goal is a body count and not the attempt to incite an irrational response?"
And they are wrong.
Terrorism's goal (not their ultimate goal) is to create disorder out of order. It's so much easier to create disorder out of order than order out of disorder or chaos. Their ultimate goal is then to recreate a new order of their disorder.
Terrorism's aim is also to create doubt in the governing authority. The moment people change their normal lives to avoid the potential of an attack, then terrorism has a victory. It also tends, however, to create anger and resistance upon those who they have attacked. And in the long run, will likely lose. But if they win, they find their leadership to be extremely fragile, and subject to the same soft underbelly that they cut into themselves.