Well, I'll take a shot at this...
From Dictionary.com -
1. The belief that race accounts for differences in human character or ability and that a particular race is superior to others.
2. Discrimination or prejudice based on race.
The unlawful use or threatened use of force or violence by a person or an organized group against people or property with the intention of intimidating or coercing societies or governments, often for ideological or political reasons.
So racism is harboring prejudice based on race, while terrorism is acting on these prejudiced beliefs in a violent way. Racism can lead to terrorism, and most terrorists are also racist, BUT not all racists are terrorists. In other words, I believe that the term "terrorism" is significantly more extreme than just "racism."
As for your quote, I, unfortunately, tend to agree that some people are beyond help in terms of their hateful views. But, as somewhat of an idealist, I try to find good in the worst people and would give everyone a chance to change their ways. I would never kill someone based on their views, even if they are hateful, because killing them would make me no better than they are.
Thanks for posting this; it really did make me think. It's nice to see at least some degree of intellectual discussion here.