It's not a question of guts. It's a question of viable options that have a realistic probability of achieving intended results. On this plane, there are basically two options. War or Diplomacy. The third option, as was being discussed in a different thread, is Indian covert action on Pakistani territory. The problem with this option is that Pakistan already believes India is sponsoring terrorism on Pakistani soil (let's not get into why or why not, the point is this is the perception of both the Pakistani government and the people), any escalation in Indian covert action on Pakistani soil will be responded to in kind... perhaps in an even more extreme fashion. This will have the effect of dragging India into a low-intensity conflict where you might see covert strikes occurring every day or other day in major Indian cities. This is exactly what the Indian government wants to avoid.
Obviously, the issue with all-out war is that we will all be eliminated, so it doesn't appear to be a reasonable way to resolve our differences.
Personally, I am not a big fan of talks either until there is a fundamental change viz 63 year old core issues that have shaped all subsequent Pak-India discussions/disagreements.
So where that leaves us, I think, is that there can be diplomatic pretense, but there can't really be a significant response from the Indian side. All the possible options available (as discussed above) lead to a worsening of the situation from the Indian pov. I think that's why you see the GoI pay lip service but not actually engage in any meaningful action. Again, not a guts issue, more an options issue.