A good observation. In fact, it's both.
As I mentioned earlier, al-Qa'ida is a political organization masquerading as a religious one. Islamic scholarship and philosophy is important to al-Qa'ida, but ultimately, they're about changing the here and now, not debating points of theology.
Islam is not merely a religion or a form of government. It is, strictly speaking, a cult(ure) that manages both the spiritual and the temporal. The rise of Western military and economic power over the last several hundred years was unfortunate, but it never threatened Islam culturally. Islam is simply too insular to be affected by such things. Western power simply meant that the non-Islamic barbarians were too powerful to for the Arabs to continue enlightening them. Even when Islamic lands were conquered, the colonization efforts never took more than a superficial root.
That changed over the last century or so.
The Middle East had fallen so far behind that even the inadvertent changes they absorbed were starting to change their culture. Mass media showed the Arabs how backwards they really were. Easy travel and telecommunications brought the outside world to their doorstep. Military defeats, not by massive Western armies, but by a handful of Jews (who were then seen by Arabs not as powerful and menacing, but as the butt of jokes), paraded their weakness in front of the world.
In short, Islam's claim to be the end all be all of human advancement was shown to be wrong on all counts. Western ideas penetrated the region. Syrian socialism, Iraqi secularism, Egyptian nationalism, Bahrain's Las Vegas like atmosphere, everywhere was seeking aspects of Western culture they liked, and trying to install them instead of Islam. On an individual level, Iranian girls own miniskirts, guys listen to rock music, and everyone parties in private. Sure, the people were Muslim, and believed in Allah, but Islam as the dominant guiding principal of daily Arab life was being discarded on every level. Deep fault lines emerged in what was once a monolithic entity.
Now, you can't just toss aside a cult like that and not expect consequences. It is, at it's core, a lifestyle mandated by Allah. Hardliners realized the threat that this corruption posed, and have launched the revivals you're talking about. No doubt about it, the retrograde, 8th century idealistic Islam is making a comeback.
The comeback is at hand because they're mobilizing in the face of a threat. Islam is always in a state of conflict when it borders a non-Islamic nation. Still, what's going on now is almost a frenzied response, like someone who is flailing because a garrote was slipped over their neck. Western ideas and technology threaten to suffocate traditional Islam in a way that wasn't possible before, and that has given rise to the militant, reactionary response we see now.
Okay back to your post...
Yes, Islam has been retreating since the Westphalia Treaty and the rise of nation states in the West. At first, it was unconcerned. It had been turned back, but it could live with it. After all, it had Istanbul. Vienna would have been nice...but...
Then something very upsetting happened. The French invaded Egypt. And there was nothing the Muslims could to about it. It took the British to get the French out, but the British didn't go away...they stayed... and now we have a problem.
At first the answer wasn't Islam. It was Arab Nationalism. And Arab Nationalism was the key up until the First Gulf War.
Along side Arab Nationalism was Islamic fundamentalism. Not as strong, but there. This was the return to that I mentioned in my last post.The Muslims looked around and said... hey, this humiliation is the judgment of Allah on the way we live, and how we believe. We aren't doing the will of Allah because we aren't fighting jihad.
The moderate Arab leaders tried to tell the Reagan administration that they creating a monster by their support of the muhjahadeen. Why? Because it was the same monster they were fighting. But, now flushed with victory and armed with fighters and money... the threat that started with the Egyptian Brotherhood blossomed into other organizations backed by states.
When Iraq was defeated in the Gulf War... Arab nationalism was discarded as the means to reestablish Arab dominance and fundamentalism was embraced. Not in desperation, but as revelation... see, here is the answer to not only the corruption in our lives but to why we are humiliated by the West.
The Fundamentalist believe the West is corrupt and dying. But, the west, through culture and politics and economics has invaded the Middle East on all fronts It's like you said... this is an affront.
So the fight is being waged against two enemies. Against the West and against the corrupt leadership in Middle East countries that allow the pollution from the West to continue. This is the religious component. If we are to be what Allah said, then here's what we need to do.
The Qu'ran says... and we get jihad - a political blueprint to take over the world. Now, I said that like the Brain would say it to Pinkey...but bottom line: Islam is to dominate not be dominated (politically, religiously, culturally, economically, etc)... And Afghanistan showed the terrorists that they could win against one of the vanguards of the "West". Now, they believe they can win against the other.