Chogy Sir,
it's a quagmire. If government doesnt get involved and try to secure their release, it will look like they have abandoned the anti-taleban tribal militias (which are actually killing and capturing talebs voluntarily despite modest stockpile of arms, limited supplies, and casualties)
government cooperating with talebans most preposterous demands is also a NO-NO in my opinion. Pakistan's policy should be that even if 500 scud missiles and mortars were pointed at Islamabad -- we will never negotiate with terrorists (especially those that stoop so low and kidnap innocent children), regardless of position of weakness or strength.
i think we may have to come up with an "out of the box" solution.....if i was in command, i'd do a few low fly-bys at mach 1 over their villages just across the border; to wake up those people and let them know our might. Then I would hold Afghan police accountable (it's a hostile force anyways) and give them a 3 day ultimatum to find those children before we go in ourselves and find them.
may sound wild, but honestly -- that would be my approach. These people are cowards for hiding behind children. They are no mujahideen, they have no shame or morals whatsoever.