Ah, I'll tell you some other time
regarding my nick
The rabid anti-India feeling in Kashmir is mostly confined to urban areas (mainly Srinagar). The recruits for Indian Army, police etc. come from rural areas of Kashmir, and not from urban ones. There is a deep urban-rural divide with respect to this.
There were surveys done by Indian Express etc. which asked Kashmiris if they want "Azadi". Who would disagree? Considering the conditions there, one would have to be an eternal optimist to do so.
I don't get your point about the insurgents coming to challenge the state. You mean that if Indian army withdraws, the insurgents will stop coming across? Are you serious?
Obviously, if the IA withdraws, the insurgents (along with PA) will march into a Kashmir which will then become a part of Pakistan.
Such a situation be strategic suicide for India, for starters, by giving both China and Pakistan the high-ground in the region, it will also become a base from which Pakistan can launch Islamist movements right into the heart of India.
The central forces were sent to contain the Pak-sponsored insurgency, and not vice-versa. They are not the ones fuelling it.
The Indo-Nepal border is a problem, but you can't compare it with an open LOC. An insurgent crossing over from Nepal has to firstly enter Nepal, and then travel across half the country in order to reach Kashmir. Large scale infiltration is impossible, and only terrorist attacks (mainly in other parts of India) can be planned this way.