It may not be the best definition, but I do think the function being performed by the contractors must be the criteria used to determine if they fit the definition of mercenary.
"As to the point of whether these 'contractors' are mercenaries, or should be looked at in a different category, let me add function to the definition and see if that moves it forward. Security is a military function, but it is a function that also belongs to the police and even to private security guards hired for sporting events,and what not.
A truly military function is to close with, engage and destroy the enemy. I'm not suggesting this is the only criteria to be used, but it is the most obvious. If the contractors are hired to close with, engage and destroy the enemy, then by all means they are mercenaries in the truest sense of the word. If their function is strictly to provide for the security of personnel and property, I think mercenary may not be entirely appropriate as a label in many cases.
I would not be surprised to find that there are some contractors who have been hired specifically for offensive operations, especially operations that we might want to distance ourselves from, but if this does exist, I would expect it to be a very small number, and the employers would not be traceable from the bank accounts back.
I, myself, am actively seeking contract work in Iraq, though my function will presumably be logistical planning and support. I am most certainly motivated by the financial incentives involved, however I would agree w/ some of the previous commenters that there is also that sense of camaraderie and adventure that is rare to find here in civilian life."[edited grammar and spelling]