Unconditional surrender is what terrorist organizations want, and they will wage war without end until they achieve it.
The problem with peace is that it is symmetrical. Everybody has to agree to peace before it will happen. War is asymmetrical. It takes only one entity (including, at the limit, one person) to make a war, even if everybody else wants peace.
No, it takes two. Countering violence with violence is not always the only solution. Sometimes sustained violence in response (war) is the the way to go, sometimes it just escalates the original violence into something far worse and far harder to unwind. For example, and as the OP states, we may be generating far more "terrorists" than we are killing.
We humans often fail to see this because we are so myopic and vengeful. We suck at seeing the big picture and taking the long view.
The problem with peace is that it is symmetrical. Everybody has to agree to peace before it will happen. War is asymmetrical. It takes only one entity (including, at the limit, one person) to make a war, even if everybody else wants peace.