I didn't realize that the Terror would be less armoured at all than the ones of the previous decades, I just thought that since they served the same purpose.
Times change and techniques change, even if the role is the same.
Knights in medieval warfare served the same purpose as cavalry in Napoleonic times, but which was more heavily armored... the medieval knight or the Napoleonic cavalry? The knight was more armored.
Which is more heavily armored... a WWII Battleship, or a modern Aegis Cruiser? The WWII Battleship is, even though the Aegis Cruiser is more modern.
It's no differant with gunboats... ironclad vs more modern gunboats from the turn of the century. The ironclads were more heavily armored, though a modern gunboat was faster and better armed with modern weaponry (relatively speaking).
Simply put, armor of older days generally doesn't hold-up well against more modern weaponry. Wrought iron plating of 1860s ironclads wouldn't do well against a quick-firing high velocity cannon of of 1900... of course not being armored, a 1900 gunboat probably wouldn't do too well taking a full broadside from an ironclad either... I call it a wash.
This is why gunboats from the turn of the century didn't really participate in any fleet battles (nor were intended to)... they were used for police duty and shore bombardment, especially against more "primative" foes... taking on a bunch of wood junks would be easy for a Colonial European gunboat... but you didn't see these gunboats pitted against "real" enemies with more modern weaponry.
As for Civ4 terms, all this talk about use of the Blitz is simple... give it to all modern units or don't give it at all... you don't need to say "Blitz vs only wooden ships"... that's not needed... just Blitz or no Blitz... it's that simple... I can assure you, while a Battleship may run through four frigates in a single turn, a Battleship would not go through four enemy battleships in a single term... the fact it's 40 to 40 instead of 40 to 8 would ensure one battle would be the end of that turn (because 40 vs 8 may leave you with 40, but 40 vs 40 would probably leave you with 6 points... no more fighting for you this turn!).