Being that it's also used as a cry of distress (e.g. during accidents), it seems to me to carry a far more self-reflective connotation than your interpretation would imply. It wouldn't make that much sense to a Jihadist who would presumably view the enemy as dirt. If there's one thing worth pointing out that God is greater at, it would be the struggle or stress the Jihadist experiences, and so he uses the cry to inspire courage in himself. It also, I would think he supposes, strikes fear into enemies, because he is saying "even if you kill me, God is greater still", i.e. I will fight to the death, and the cause never dies.
Invoking Allah to make a petty insult by comparison? That strikes me as sacrilegeous at best.