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Description of problem:
The 'Open Terminal Here' service of dolphin doesn't honor the default terminal set in the Default Applications module of systemsettings. Konsole seems to be hardcoded there.

Version-Release number of selected component (if applicable):
dolphin = 4.9.2-2.el7

How reproducible:
Always

Steps to Reproduce:
1. Set i.e. xterm to be a default terminal emulator in the Default Applications
2. Open Dolphin
3. Right-click somewhere and choose Actions->Open Terminal Here
  
Actual results:
Konsole opens

Expected results:
xterm opens

This is because Dolphin uses for this konsolehere.desktop file. If you want to open xterm like you described, you will have to create similar .desktop file and put it into /usr/share/kde4/services/ServiceMenus/.

Something that perhaps SystemSettings should have done in this scenario?

This is the responsibility of the applications. They have described services in .desktop files and Dolphin then collects all these services and uses them. Like Konsole which installs mentioned .desktop file which Dolphin uses. It's not dependent on system settings.