He never claimed the Italian guy said terrorist. That was a British "lip reader" claiming she could lip read spoken Italian off profile angle video. IOW, BS.
Looks near certain he said something about the guy's sister.
Yo' momma!
When I first heard the explanation Sunday evening, I thought of the old joke:
Materazzi: "Got any naked pictures of your sister?
Zidane: "Non!"
Materazzi: "Wanna buy some?"