VCheng
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the settlement is very much possible, but earlier its done (and negotiation should be done secretly like camp david) the better. As times goes by, both sides will have entreched position.
Currently we Indian should focus on good governance in kashmir and giving them a sense of security. The Indian army should not be visible in any urban center there and should not be allowed in any day to day operation (without explicit request from district admin/ state govt)
If I was a kashmiri, I would be insanely angry too.
There is some merit to recognizing the presently entrenched position and converting the LoC into the international border.