I find it very hard to believe some of the things I read in this thread. Bush was not a suicidal idiot, Adolf Hitler, or an absolute monarch. He did not have the power to unilaterally invade the entire Muslim world on a lark.
He wouldn't have. I suspect if Junior was an Islamophobe- we'd probably see more emphasis in Afghanistan on getting rid of Bin Laden at all cost- the Afghans would hate us, their casualties would be much higher, but Bin Laden would have been dead earlier.
Iraq would have happened, would have been a decapitation strike against Saddam, probably a repeat of Gulf War I. No nationbuilding or attempt to make Iraq stable.
Bush cruises to an easier re-election in 2004.
Iran would have been attacked as well, or would have rolled over knowing the US would be willing to use total war on Iran. Russia would not put Iran under its nuclear umbrella. If Iran isn't attacked, Saudi Arabia would be , as Bush would implicate the Saudi monarchy (truthfully) as responsible for 9/11 and Americans would accept it. the US might try to colonize the oil for themselves.
that said, terrorist attacks against Americans do vastly spike, an antifada happens against Israel, but this would further reinforce anti-Islamic feelings among Americans (even most Democrats)
The economic crisis happens, but I suspect Hillary's hawkishness allows her to barely edge out Obama (or Obama fades early and Edwards is the challenger on a proto-Bernie platform) and she wins in 2008 vs McCain (who does not pick Palin)
America will suffer a long-term cost in tarnished international reputation, but Islamophobia does well in Eastern Europe, and will probably be stronger than OTL even in Europe. Islamic states will need China as a friend, they might unite.
Folks are underestimating how popular Islamophobia was in America after 9/11, and some of that feeling still exists. People would have accepted a nuke being used in retaliation, even if there is no way Junior would do that.