This sounds more like sleepwalking than a terror. My daughter had both- when she had terrors, it was really like she was terrified- her eyes were wide and she would scream or look like she was screaming but nothing would come out. The first time I saw it, I thought she was having a seizure and rushed her to the ER. She had woken from it by the time we got there and they essentially laughed at me. She was around 2 when hers started, but the talking/walking in sleep started before that, sometimes she would cry or have some dialog with me, but like you said, would drop back off to sleep.
My mother is in her 50s and has sleep walked her whole life. She says the things that have helped her most are to not have stimulation before bed (she has a huge fear of spiders and snakes, so she makes sure to avoid those subjects, as well as sad/upsetting tv, etc) and to just gently speak to her and encourage her to go back to bed. Sometimes she remembers quite a bit of it, and sometimes she remembers none of it. When she was little, her father would yell at her and try to wake her up or tell her the scary things really were there and instill more fear in her because he thought it was funny and she would not remember it (but she did and it made things worse.)
I would try for an earlier bedtime. My girls sleep best/most soundly when put down around 7pm. I have a 10 yr old and 3 yr old and they have similar bedtimes and it still works for them. My younger daughter (with the sleep probs) was a night-owl from a very young age and it took me a long time to get her on a better routine, but really worth it since it helped her sleep far more soundly.
CDH has a ped wing for sleep studies too, if you are really concerned.
M.
PS- It has absolutely been proven that things that happen to us in real life that we experience (including TV) and food reactions can have impacts on the quality of our sleep. Those things impact the brain, and therefore holistically impact our sleep and our wakefulness. You can research this on your own too, obviously. But I just saw the response below mine and was a little shocked that someone would negate that.