In the context in which it is used, "terrible vision" is not an oxymoron. It refers to the apocalyptic dream that Crusoe has while delirious with malarial fever, and it is truly terrifying:
I saw a man descend from a great black cloud...He was all over as bright as a flame, so that I could but just bear to look towards him; his countenance was most inexpressibly dreadful, impossible for words to describe...he moved forward towards me, with a long spear or weapon in his hand, to kill me; and when he came to a rising ground...he spoke to me...All...I understood was this: "Seeing all these things have not brought thee to repentance, now thou shalt die;" at which words, I thought he lifted up the spear that was in his hand to kill me.
Though this is indeed a horrific vision, it represents a crucial turning point for Crusoe, who understands the vision as the manifestation of his guilty conscience at his formerly sinful way of life. He begins to think of his situation on the island as punishment for his sins, rather than attributing them to capricious fate. So while "terrible vision" is not an oxymoron, it was an important, and even life-changing moment for Crusoe.