At least 60,000 people have died in the insurgency.
This is exactly what the militant Islamic virus does. It keeps populating an area and then demands independence (see Kosovo) or terrorism starts. After Kashmir the next province will be contaminated. India understands this very well after 50 years of dealing with Pakistan. Musharraf will not take decisive steps to stop the militants so India will. And should. The militants want to overthrow the government and make Pakistan more like Iran or Iraq. When the fighting starts the militants will be eradicated by India and a more sensible, civilized government will be put in control of Pakistan. Then the virus will start to grow again. Unfortunately, what the world needs is the ultimate wake-up call. When one of these militants finally uses a nuclear device there will be a call for the complete extermination of the virus. I think India has the intestinal fortitude to do it.
That's where I disagree with you. I don't think India could ever eradicate the terrorists, and if they're successful in knocking Musharraf from power, his replacement is likely to be overtly pro-terrorist.
I don't think India has any intention of occupying Pakistan under any scenario, because the residents wouldn't tolerate their presence, and they all have guns. Red China would have an easier time occupying Texas.