Terrorists, even suicidal terrorists, aren't mad, they're just impossible to understand in the way that mad people are, so we call them mad. But they're bad, not mad.
I've heard that the UK terrorist watch list is about 3,000. But even that is too many to physically "watch" so the name is a stupid choice by the authorities/politicians. Naturally we're not going to be told in detail what is being done as surveillance in individual cases but I'll bet its cheap simple automated stuff -
use of passports
unusual credit card transactions
purchasing flight tickets
After that I'm going to guess the security services have an informant that they ask to please let us know of so-and-so does something. After that they might go on a more active watch list.
There are two ways to approach marked suspects. One is to wait for them to initiate something really really bad. Of course, you might be 5 minutes too late and they already killed someone. This approach preserves the lines of intelligence and informants
But I wonder if the hoary old "zero tolerance" approach might not be viable? Let them suspect they're being actively watched all the time. So, one of the 3,000 on the watch list has a car with a faulty brake light - he's stopped every time he drives it, easy to arrange with ANPR pings. And he's searched and his car's searched every time, and all his passengers are ID-ed and logged and they're all searched too. And for any drugs found in the car, his home's searched too.
Pretty quick he gets the idea - and so do his friends - that he's a marked man. He becomes isolated and is cut off from terrorist activists. So are his friends.
It would be a new approach.