All of your points are correct, but there is one obvious need to keep Pakistan in the fold. If you abandon Pakistan, you run the risk of letting the country fall into the hands of the Islamists. When that happens, you've got a Taliban-style government in a country of 100 million people, armed with nuclear weapons and medium-range delivery systems--with the capability to field a crude ICBM within a decade. If we ever win the War on Terror, we might be able to tilt in favor of India. Until then, we have to keep Islamabad out of the hands of the Islamists, and keep Pakistan engaged in fighting the terrorists.
I dont buy this argument that Pak will ever be a taliban style entity. There is fundamentalism there no doubt but none of the major political parties have ever been like the taliban. Neither the PPP nor Nawaz Sharif. Those are the 2 main political parties. So if there is democracy , there is no question of a taliban style mgt. The other major aspect is that the Military controls the country and the mullahs cant wish that away. Even if Mush goes for some reason there are other commanders in the military that will take over. The mullahs and the jehadis simply dont have the muscle to take over Pak. They never had it. This whole idea has been popularized by vested interests so that US keeps bribing their military.
I am surprised to no end that no mainstream CIA or any other analyst will call this bluff. When this is taken for granted in the Indian security establishment.