Peter, people do use the world evil to distinguish acts from merely "morally objectionable behavior," or wrong. In this case intellectual charity and a little contextualism is in order in order to understand the meaning we might imagine Thompson was getting at.
There is a difference between these two acts: a mass murder and a five year old shoplifting. The difference lies in the severity of the consequences of the acts, the motivations of the individuals performing the act, and in the degree to which it is objectionable. Dictionary definitions have no de jure or de facto control over what meaning, or use, lies behind words. The argument ad absurdum you presented showed that quite well. We might imagine that it is a different meaning that Thompson is implying, since the acts of Britain were, to many, morally objectionable and yet he draws a distinction between that and evil.
"When one encounters Evil, the only solution is violence, actual or threatened...[distinction provided between evil and wrong]"
"When one encounters behavior that is (morally) objectionable to a certain extreme degree both in regards to the act itself as well as, possibly, to the imputed or imagined motivation, and there is little hope for change the only solution is violence, actual or threatened...[distinction provided between such behavior and wrong]"
It is not irrational to not waste words, assuming some intellectual charity will be provided. Even though he used the sticky word evil, he used fewer words to say something essentially like this:
Non-violence against some people/groups simply will not work because they simply don't care, are perhaps sociopaths with no conscious, or are perhaps delusional/unknowledgeable (and undeserving of blame) but persist in this mentality and behavior that affords no likely solution except violence or the threat of violence and there is a distinction between between such behavior and merely wrong behavior, where pacifist responses may work].
When I first read the quote, I understood something akin to what is above.
My point, though, is that since genuine meaning is understood by many individuals when the word evil is used it is not irrational to use the word. The word evil has various meanings but we can allow that there is some concept conveyed by it that is useful in its distinctions between other words.
The fact that there is a lot of emotional/inept-philosophical baggage to the word does not mean it is irrational to use it.
Perhaps there is no objective morality and perhaps it is irrational to prop up personal subjective moralities, non the matter, the word evil, as it refers to concepts referring to things in the world, can be used to convey distinctions, and can be used rationally.
Peter Turney: "thinking of human relations in terms of "good" and "evil" is not rational"
Except for the fact that most humans do think of human relations in such a manner (and so they are useful in communicating with fellow humans) and those terms do (generally) usefully differentiate between different sorts of actions. Even if Manicheanism, in its various formulations, is a bias, those words serve, very well I might add, to show which actions humans general abhor versus those they generally approve of.
There is also usually a distinction between wrong vs evil, wherein evil is simply more wrong than simple wrong. It is perhaps an expression of my distaste for onions vs my distaste for Rocky Mountain Oysters.
Also, none of these terms require appeals to a higher authority as, as words, they simply reveal individuals' subjective impression of actual facts of the world. Rather than always list a litany of facts (torture causes such a specific threshold of pain and that threshold being reached creeps most humans out), we might simply use those normative terms (torture is evil). Those terms carry meaning, because they carry meaning they can be used rationally, the bias/fallacy seems to be in connoting the use of these terms as irrational simply because people often use them irrationally.