Moving the U.S. embassy to Jerusalem would fly in the face of the standing U.S. policy on this issue as laid out in the Declaration of Principles (1993) and the Interim Agreement (1995) on Palestine. Israel is a signatory to both of these documents.
The location of the US Embassy has a lot to do with terrorism for the simple reason that the status of Jerusalem is a major bone of contention between the Israelis and Palestinians, and Palestinian opposition to Israel has in many cases and over a long period of time taken the form of terrorism. In addition, the support for Palestinians by many Leftists throughout the world has in my opinion involved turning a blind eye towards Palestinian terrorism because it is generally directed against Israel. So basically anything the USA does that involves Palestinian-Israeli issues necessarily involves terrorism. Put differently, the reason that Palestinian-related issues are on the world’s radar screen is mostly because of Palestinian terrorism. Anyway, I am not familiar with all the terms of those prior agreements you cite but I was not aware that they specify where foreign embassies are to be (do they?).
Having served in the AmEmbassy Tel Aviv 11-years prior, there has always been active hallway talk that the it would be moved to J-rue.