@Hutchroy,
As I said, none of the options are pretty. Yet the status quo is not working at all. Not at all.
I also think, as @Speaker hints at, there is the 800 lbs gorilla in the room called Kashmir. Much of the reluctance of Pakistani military to go after these militants is the Kashmir issue. Indeed, in some NY Times Comments, a few perceptive Americans manage to point out that the road to Kabul lies through Kashmir.
So what can Pakistani army achieve if Pakistan has at least interim peace with India? I think the army can really beat the crap out of these religious fanatics as it did in Swat when it suited the military. This will be easier (not easy, btw) to do throughout Pakistan if the military and the ruling political parties are not delegitimized as 'American Puppet'. Whether we like it or not, it is the perception and vile propaganda which rules Pakistan. Too many 'educated' idiots still believe that Taseer himself committed some kind of Blasphemy, as an example.
About your assertion that there is widespread inroads by Jihadis in the security apparatuses, I am not sure that is correct. May be. May be not. But these fanatics are certainly sustained by the perception that the Pakistani military ('Busharraf') and the ruling parties are doing America's work.
Also, for Americans, the Al Qaida is decimated in Afghanistan. The original 9/11 plotters were successful by being in western countries. So it should be a task of counter-terrorism instead of carpet bombing.