I'm not entirely sure that it has anything to do with the terrorist activities, but more to do with the Chinese governments need to control every single aspect. Not to get totally off topic, but I don't think that China should have been awarded the games in the first place. It's been a comedy of errors from the get go.
First the pollution, then the Chinese government felt affronted when the American athletes wore breathing masks (when the great majority of their own citizens do the same), then they clean out the city and refuse travel permits to anyone they think might protest anything, then they block access to websites (amnesty international, etc) because they say that those websites are a threat to the National Security, and last but by no means least, they insert one little girl to lip sync a song, because the little girl singing the song was not "cute" enough, and that was supposedly in the nations best interest? And don't even get me started on teh female gymnasts from China. I was a gymnast, and competed on the elite level, similar to the current olympians, although I never went to the olympics, and if those girls are all 16, I am a purple elephant. True. The Chinese gymnasts are small, but generally they even have some curves, and they always have all of their adult teeth, something which one of these girls seems to be missing.
No, I can't believe that it has much at all to do with his security and far more to do with their need to control every aspect of who he might meet, etc.