Chief Rabbi Yitzhak Yosef discussed religious complexities involved in war with Kol Yisrael radio today (Sunday). One of the questions raised was whether a Kohen who kills a terrorist is able to perform Birkat Hakohenim, the priestly blessing.
Rabbi Yosef answered that, while killing a non-Jew would normally disqualify a Kohen from the service, killing a terrorist falls under the halachic insistence of "If someone is coming to kill you, rise early and kill him first."
Furthermore, the rabbi explained that killing a terrorist in order to save an innocent person's life is "a great mitzvah [good deed]."