Recently a friend had an operation in which she was given medication to make her forget the operation (it was an eye operation done under local anaesthetic, and apparently the "scalpel coming at your eye" memory causes nightmare reactions). So, she must have had an instant of terror on seeing the scalpel cutting into her eye, but now has no recall. If so... was she ever terrified? If there is no memory of it whatsoever, can we call it terror? If so, how do any of us know that we haven't been similarly terrified?

Let's assume that had she not been given the amnesic medicine , we would agree that she experienced terror when the scalpel approached her eye. The question then becomes: why should the administration of the amnesic medicine change our view? Given your description of the medicine, it does not cause her not to have an experience; it just causes her to forget her experience. So, to answer your question, yes, she was terrified. She had an experience of terror, and she is now unable to recall that prior experience of terror. You seem to be assuming that we must be able to remember an experience in order for it to have been truly experienced. I am inclined to deny this assumption. To help see why we should deny the assumption, consider a slightly different case. Suppose someone has an instant of terror and then dies. Would you want to deny that she experienced the terror, even though (due to her death) she never was able to form a memory of the terror?