Given that the family was Muslim, the Internet jumps to the conclusion that there was some racial stereotyping going on here. A day or so earlier, the Prime Minister had announced a fund (or at least partially reversed previous cuts to such funding) to teach Muslim women to speak English (which would presumably include learning the correct spelling of such words as 'terraced').
If the police were serious about gathering intelligence about potential extremists in the community, and if they believed that this was a genuine lead to an extremist family, you'd have thought they would want to treat the boy as a valuable source of information, rather than immediately alerting the family that they were under suspicion. What purpose does a home visit achieve, apart from shock and awe.
The authorities have responded to the news reports, claiming that the home visit was not prompted solely by a single misspelling, there were a number of issues arising from the child's schoolwork, and that it had not been regarded as a terror incident. The home visit had been done by a social worker, accompanied by a PC.
According to the boy's cousin, the boy is now scared of writing, or using his imagination. Arguably that's not a good use of police time, when a bit of well-timed sarcasm by a schoolteacher can achieve that outcome much more efficiently.
Update. Apparently what the boy actually wrote was this.
"I hate it when my uncle beats me. I live in a terrorist house with my uncle."So what happened within the family after the social worker (accompanied by the PC) leaves? And what happened within the community when the media sensationalized the story? Can anyone use some imagination?
Rahila Bano, Muslim boy, 10, probed for 'terrorist house' spelling error (BBC News 20 January 2016)
Mario Cacciottolo, How much of a problem is speaking English for some Muslim women? (BBC News 18 January 2016)
Aisha Gani, Lancashire police criticise BBC over 'terrorist house' story (BBC News, 21 January 2016)
Lancashire 'terrorist house' row 'not a spelling mistake' (BBC News 20 January 2016)
Bill Jacobs, 'We've done nothing wrong' - Teachers and police respond to 'terrorist house' 'overreaction' (Lancashire Telegraph, 21 January 2016)
Updated 21 January 2016