A terrorist can't really build a fusion bomb, because you need a government to support the infrastructure. But the fear is not entirely unjustified because a government would be able to give the bomb to a terrorist who then uses it. Or perhaps a government employee might steal it (for bribes) and give to a terrorist. So I can imagine terrorist having a small fission bomb. But I cannot imagine an arrangement where a terrorist would acquire a fleet of B-29's that could be used to fire-bomb a city.
To build it from scratch yes, it's possible to build a primitive bomb from stolen refined plutonium. After the collapse of the soviet union, a lot of it went missing and there a dozen cases of people getting caught trying to sell it on the black market (and those are just the people that've been caught.)
Mass arson is possible, though not on the scale of firebombing. The US in WWII developed the idea of strapping incendiary bombs on bats and releasing them in a city, where they would roost in random buildings and start hundreds of small fires.
Fire bombing can (and has done) more damage to a city than a fission bomb.