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Have you opened the save to confirm that terror is indeed 2 when this events fires? Then we'd know if it was a problem with the flag being too high or the trigger being weird.
Why bother having:
command = { type = local_incflag which = terror value = 0 } ? Just don't mention it
You might want to test this by looking in the save after the revolution, but I think:
command = { type = local_setflag which = terror value = 0 }
Might actually set it to 1, certainly
command = { type = local_setflag which = terror } does.