You fail to understand that different groups of people keep different lists and don't talk to each other.
The terrorist watch list people don't call up the Army and ask them if so-and-so is mentally stable and not a terrorist. They just add names to their own list based on some wacky criteria. Names are not going to be actively removed once they're on the list; instead, they'll only be removed if the name being there causes some sort of ruckus, as in this case. Having more names on the list is better than having less names, because it protects the people in charge of the list. This way, if somebody on the list hijacks a plane, the keepers of the list can say that he was on the list.
The terrorist watch list people don't call up the Army and ask them if so-and-so is mentally stable and not a terrorist. They just add names to their own list based on some wacky criteria. Names are not going to be actively removed once they're on the list; instead, they'll only be removed if the name being there causes some sort of ruckus, as in this case. Having more names on the list is better than having less names, because it protects the people in charge of the list. This way, if somebody on the list hijacks a plane, the keepers of the list can say that he was on the list.
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