Sadly, the West has yet to admit that it really is a war. We are pretending it is a police action, which is a great way to loose wars.
Partially we CALL it "war on terror" for PC reasons, as you know. But there are also rational, non-insane reasons for this vagueness - to freeze/de-fang a lot of our potential enemies from teaming up. For example, if Bush were on TV declaring out and out every day that this was a "war against militant Islam", a lot of fence-sitters in The Islamic World(tm) might be spooked into joining/aiding the other side. Do we want that?
I don't think so.
So why the obsession on what we CALL it?
Whatever we're CALLING it, we have invaded two sovereign countries. "Police action"? Come on. Look at the reality, not the terminology.