Well, terrorism is a subject researched for only 50 years or so, in strategy studies, which might be the relevant discipline to find an answer to your question. Scholars usually studied and researched symmetrical High Intensity Conflicts between two countries, and fight against terrorism or guerrilla is a somewhat new research field.
When fighting terror or guerrilla forces, you must pay attention to several aspects of the enemy's activity: the logistical aspect - you must isolate the scene, in order to dry out the enemy's stocks, and cut the supply lines to the area in which he acts.
And another aspect is the operative, preventing the terrorists from acting against you. There are many ways of doing that, starting with exploding national myths of the other side (not allowing them to use their language, flags, anthem, or any other way of expressing their nationality, and over time breaking the local population support), ending with killing the entire population (genocide).
Killing the terrorists leaders is one of the ways to prevent them from acting, in between those extremes.
Fighting terrorism tends to be really brutal (we can witness extreme levels of brutality against civilians even compared to a conventional declared war between two armies), due to the fact that it's much more cost-effective: the less careful you are when using violent force, it is less dangerous to your side in terms of life loss. Apart from this "economic" factor, there is also a psychological one: there usually is a lot of frustration within the army or population of the nation fighting the terrorists, due to severe trauma caused by the terrorists, and therefore a will to take revenge.
Of course you have to take into account that the more you hurt the opposite side's population, you increase the terrorist organization appeal to part of that population, and therefore strengthen its local support.
Research shows that what a nation needs when fighting terrorism is an extremely high tolerance to losses on its own side, and tolerance to the brutality exercised on the other side. It has much to do with the relations between the administration and army on one side, and the civil society on the other. The more democratic a country is, the more the population is involved in the doings of the army. Nations can't just keep on doing what they easily did centuries ago without anyone knowing or giving an opinion.
Democratic societies tend not to accept brutality exercised even against the enemy, and that influences a lot the ability of the army to fight terrorism, even when having a clear material and logistical advantage compared to the terrorist organization.
There's a common conception that an army can't beat a terrorist organization, but the french in algeria did a pretty good job at it, using extreme brutality against the local population and the terrorist leaders, at least until the French people put a stop to it.
Israeli society is putting a lot of pressure on the policy-makers to stop the assassinations of most wanted terrorists without trial, and some might say, that is the reason its not working, since the terrorists main target is public opinion, and once they conquer it, there'll always be someone to replace the leader since they see they're succeeding.