As for cats terrorizing squirrels... I believe it, but they're just doing what comes natural to them. This related story isn't about squirrels but it could be. I'm not sure if you've read about it since it's a regional story here in the Midwest. Some people in Wisconsin are trying to get the domestic cats' status changed which might lead to legislation making it legal to start shooting feral cats in that state, because the cats prey on songbirds! I love the birds too, but I'm not sure blowing away wild kitties is the answer to the problem. It's a sticky debate, the feral cat issue. I see a few roaming cats in my neighborhood but I'm not sure if they're feral. They're probably owned but loosely supervised, which is a philosophy on one side of the coin that needs to be considered. Bleh. Here's a link to a brief story on it:
http://www.avma.org/onlnews/javma/jun05/050601y.asp.
Thinking about this stuff makes my brain hurt.