The only thing I use a terror star for is to take down a super power in late game. Like thouse damn Koraths. Just send in 25 constructors and build terror stars around there key planets. While they power up I assemble my strike force. And boom war one pretty much in turn one : ). And theres not even a diplomatic penalty for using them.
That being said I only use my TS in about 1/9 games I play.
As for giving races a TS i've tried that and every time i've done it they disbanded it in one turn. I even handed one over next to their enemys homestar and they still disbanded it.