Is hydrocephalus a terminal illness?

No. There are a variety of conditions that can occur with hydrocephalus from severe to not noticeable at all. Depending on the type and severity, a surgical procedure referred to as a vp shunt can be placed. This allows the extra fluid to be reabsorbed from the abdominal area. This has been very successful although complications with infections can crop up.
No. Hydrocephalus is a manageable problem that is treated with a surgical procedure where a shunt is placed. If left untreated, it can be life threatening.