Since Houllier made Gerrard Liverpool's captain he has improved as a player ten-fold. Also, Gerrard is Englands best midfielder and the 2nd person on the team sheet after Rooney. Where as Terry hasnt put in any great performences for England and isnt even guaranteed his startin place as much as Gerrard.
john terry is the first defender on the team sheet.
maybe he hasnt put any "great" performances for england but he has been very consistent in an england shirt.
neither had a great world cup and terry made a couple of uncharecteristic mistakes. but you have to look at the wider picture. he consistently performs for chelsea and england and if he hadnt performed in the first game against paraguay we wouldnt have proggressed through the group stages in this world cup.
gerrard has hardly set the world alight in an england shirt and if he needs the honour of being captain to improve this like you say he has at liverpool then imo he is the wrong player for the role.
terry is a leader with or without the armband.