Peter Bergen (with Alec Reynolds) explains in Foreign Affairs, Nov. 1, 2005, the failings of this reasoning. (See also Bergen's discussion here.)
"President George W. Bush and others have suggested that it is better for the United States to fight the terrorists in Baghdad than in Boston. It is a comforting notion, but it is wrong on two counts. First, it posits a finite number of terrorists who can be lured to one place and killed. But the Iraq war has expanded the terrorists' ranks: the year 2003 saw the highest incidence of significant terrorist attacks in two decades, and then, in 2004, astonishingly, that number tripled. (Secretary of Defense Donald Rumsfeld famously complained in October 2003 that "we lack metrics to know if we are winning or losing the global war on terror." An exponentially rising number of terrorist attacks is one metric that seems relevant.) Second, the Bush administration has not addressed the question of what the foreign fighters will do when the war in Iraq ends. It would be naive to expect them to return to civilian life in their home countries. More likely, they will become the new shock troops of the international jihadist movement."