Yeah, I think many here on FR get upset with W's use of that term. It's not aimed at us, its aimed at them. He's trying to separate the rationale Muslims from the psychopaths and Mullahs.
That's one of the problems with this type of propaganda in this day and age. It works on both sides. A long time ago, you drop some leaflets. What are the chances of the battlefield leaftlets making it back to your own public when the main form of news media is newspaper and radio?
Now, it comes out of the president's mouth and has an instant effect on both sides. It introduces different dynamics (like the Butterfly Effect) on your own side. Like conservatives getting angry about hearing the President say something they feel to be patently untrue. If something like that gets away from you, your own propaganda could change the nature of the campaign to the point where the end goal you wind up needing to achieve is only remotely similar to the goal you started out wanting to achieve.