Terrorist is as terrorist does.
Should Hezbollah be considered a terrorist organization in that it provides services to the public and participates in electoral politics?
The words: "Absolutely!" spring quickly to mind. And here's why...
With apologies to Forrest Gump, Terrorist is as terrorist does. The bombings of the Marine barracks in Beirut was attributed to them, along with a decades-long campaign against the West and Israel (Bynam 84-5). So despite the fluffy niceties of political correctness and their own refusal to admit their true natures, Hizballah is a terrorist organization.
Hizballah has, in recent years tried to legitimize itself with a massive influx of Iranian cash. Iranian support "has enabled Hizballah to sustain a large organization and to expand its social welfare network -- another way of gaining popular backing. Hizballah runs schools, clinics, agricultural cooperatives, television and radio stations, and hospitals, as well as mosques" (Bynam 88). Their motivation is clear: Hizballah's recent transformation into a humanitarian organization is a way for the organization to ingratiate itself into Lebanese culture and society.
By my own rather pragmatic definition, do they blow up buildings and people? Yes, they do. Do they, for lack of a better word, terrorize? Yes they do. Do they do nice things, too? Yes, but as a means to an end. Their ulterior motives are clear.
In Superman II, Clark Kent commented on the bad guys holding Lois Lane hostage on the Eiffel Tower: "But jeepers, Mr. White. That's terrible!" Perry White shrewdly answered, "That's why they call them 'terrorists', Kent."
Sources:
Bynam, Daniel. Deadly Connections. Camrbidge University Press: Cambridge, 2005.
Superman II.