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The magic item Dragonhelm gives the wearer the use of everlasting terror once per day, although the spell is only usable by a dragon who has frightful presence racial ability, so that is bit of a useless thing, eh?

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The helm doesn't say it lets you cast the spell, it says it lets you use it as an ability - it also lets you breath fire like a dracha & if you are a dracha your fire breathing is increased.

Look at the creation requirements - one of them is the spell you mention - one thast only a dragon can use.

So - based on the above evidence I would suggest that this is an item Dragons make for their Dragonkith to use.

The best & brightest of their dracha or human servants are so equipped. The helm can activate everlasting terror - the target for the spell (or in this case ability) is a creature under the affected by a dragon's frightful presence.

Tough mageblade & company attack dragons lair, mageblade enters the dragon's frightful presence aura, and loyal dracha lacky with dragonhelm inflicts everlasting terror on the mageblade while the dragon uses another 3rd level spell slot for another spell - confident that his lacky's helm will do the trick.

Doesn't seem like an eratta item to me...
Rory Weston