I think that's at least one central issue in this whole thing. Congress did not want DOD collecting information on "U.S. persons", but that hampered investigation of people who could reasonably be considered terrorist threats. Personally, I don't have any problem with the DOD investigating potential terrorists, whether they're "U.S. persons" or not.
The reference is here, but not much more to add:
Look for entry 1 November 1998.