I just received the September/October issue of Foreign Affairs in the mail, and this article on Democracy and Terrorism is worth the cover price. Basically, examination of the available data appears to suggest that democracy fosters terrorism, that authoriarian states have less terrorism, and that while democracy is good in its own right, it may not be a solution to the terrorism problem. China suffers less terrorism than India, for example.
IMHO Bush's use of democracy in an instrumental way actually cheapens the cause of democracy. It is not just a tool for another purpose--democracy is an end in itself. Which is why I'm of the mindset to crush terrorism first, build democracy second...which is the point of another excellent article in the same issue, titled, How to Win in Iraq.