Terrorized and haunted are different terminologies in the game. If something happens when a space is haunted, it won't happen when that same space is terrorized. It doesn't help that a terrorized tile is effectively a haunted tile that doesn't count as a haunted tile, but the Circle of Prayer only loses a token when it's haunted (e.g, flipped over).
So it says you can't activate a terrorized square, but is the circle of prayer still "neutrally active"?
Do you still get the benefit of the circle even though you can't change it?