Don't get rid of your pet dog just because somebody else's cat has a death wish. She is fine with 'her' cats but other mogs are intruders/vermin to a terrier and are there to be chased. Hopefully the fact that she has seen it off will prevent it from coming in your garden again. Agree that loaning a dog for ratting is a bad idea and will increase the prey drive and i would be worried about doing that seeing as you have cats at home.