I say no, it isn't. WWE characters tend to reflect the current state of the world, but sometimes in an exaggerated way. I think they actually downplay the terrorist part of his role.
Another thing is- it is exactly that- a role. There have been terror based movies in the last few years, and no complaints. His role as an arab american who may play the role of a pseudo terrorist is fine with me. I know it was unfortunate that the segment of him aired when it did last week, but I can assure you, those who put that segment together knew nothing of the horrific events that would unfold in London after the taping took place- if they did, the airing would have taken place another week.
I thibnk this is a case of people who just need something to complain about, and the media typically needing to spout off- they call the man who plays the role a terrorist? Maybe restrictions need to be put on the media, because that statement is libel, slander, or both.