Frankly, I'm disturbed that you think I'm advocating that, Hobelhouse.

Didn't I say that I didn't advocate such a policy? Collective punishment is cruel and almost always unfair, plus there's the whole "hearts and minds" thing.
As far as the intended effect of terrorism, there are two ways to wage counterinsurgency--the scalpel (the UK in Malaya) or the battle-axe (the Mongols).
Doing anything in the middle is counterproductive for the reasons you describe. And as far as adopting Mongol techniques, those are, by any moral standard, monstrous (razing entire cities and building pyramids of skulls, killing whole villages for the deaths of one soldier, killing sons so they don't grow up to avenge their fathers, etc).
Fair enough. Ruthlessness in the GWOT has been encouraged by certain segment of society for a long time now. I do think its worth noticing, however, that the 'hang' / 'rendetion' them all crowd really hasn't run the nation debate in a long time. And is unlikely to, IMHO
And United States does find itself in a conflict of course, but its kind of like Tsun Zu said, "A decent general wins and bloody conflict of the battle field. And good general routs the enemey on the battlefield. A great general defeats the enemy before stepping on the battlefield."
Unfortunately for use, there's no obviously monolithic Islamic state we can direct all our anger against. Many Americas realize, at least subconsciously, that we'd had to sacrifice a lot more money and lives to re-enact the crusades for the next hundreed years (As McCain Advocates) and aren't enthusiastic about it.
And even the islamic militants have various factions within them, some worth negiaring with and some not.
I think, however, we're returning to out policy of supporting friendly dictators instead of spreading democracy, in hopes that those dictators - who know they wouldn't survive without american power - will clamp down on the real bads, and take the blame for doing so and any innocents accidently killed on them selves...
But its important to note that, beside a very vocal fringe, most Americans aren't into collective punishment and becoming a ruthless a people of the type that can make an occupied territory part of its empire forver. (Moreover, that would require colonist as well. And off all the superpowers in history, American has been conspiciusly unique in not having many of its citizens willing or want to mover permantly to an 'American' conquest to live there and have a better life. Without the ability to seed American populations in occupied territory, the idea that we'll be there longer than we're welcome is less plausibl;e.