I see the merits of such a system. The deterrent is very high.
In India, however, "punishment" is seen as a means to reform a person rather than to primarily penalize him. Yes, there will be flaws, people who get away. However, it allows scope for people to start afresh all over again at some stage. You can't start afresh all over again with a chopped off hand or an eye lost.
Also, this won't stop terrorism. Terrorists are people who've already decided to kill themselves, or at least give up all comforts of life. When someone has taken up something as a cause he's going to spend his life for, he can't be deterred by any punishment.
