New York, New York, it's a hell of a town.
I don't think it's that people are scared, it's that people don't think the costs outweigh the benefits.
For a normal criminal accused of a normal crime, there are many factors weighing in favor of a normal trial. As a citizen, he has a strong interest and expectation that he receive a civilian trial. As a society, we place a strong value on protecting the innocent - we don't want the guilty to sit in prison. And although the trial will cost money, the amount is small enough that it makes it a fair price to pay for justice.
In a case like this, those factors cut strongly in the other direction. As an enemy combatant, KSM has no expectation that he will receive a civilian trial, nor does he have any right to such. The concerns about not incarcerating the innocent are nonexistent here - the government has already declared him guilty, and even in the incredibly unlikely event that he is convicted, the government will simply continue to detain him as an enemy combatant. Finally, the costs of this trial will be mindboggling.
When the Blind Sheik was tried and convicted in NYC, the eventual costs of providing security for the Judge alone were $28 million. Here, they're proposing to try five different defendants, which would add up to around $150m in judicial security in and of itself. Once you factor in the additional hundreds of millions for security in the courthouse and surrounding area, you reach the $400 million figure being bandied around.
The question really comes down to this: Is a constitutionally unnecessary "trial" for 5 non-citizen terrorists who will never be released regardless of outcome really worth $400,000,000?