When will we learn that we can't win the "War on terror" with tactics that inflate the ranks of international terrorists? Particularity bombing urban targets from thousands of feet; launching large scale assaults based on lies and paranoia rather than credible threats; and supporting unpopular, corrupt, brutal regimes in the name of said war?

Point:

The conclusion [of U.S. intelligence analysts] suggests that the group that launched the most devastating terror attack on the United States has been able to rebuild despite nearly six years of bombings, war and other tactics aimed at crippling it.
...
Al-Qaida is "considerably operationally stronger than a year ago" and has "regrouped to an extent not seen since 2001," the official said, paraphrasing the report's conclusions. "They are showing greater and greater ability to plan attacks in Europe and the United States."

Of course this is mute if the estimate is conflating any force acting in opposition to American interests as al Qaeda. This has been the MO recently in DC, likely in preparation for the upcoming debates over the war in Iraq. My impression gained from reading the AP piece (linked to above) is that this estimate resembles pragmatic analysis rather than political rhetoric.

So what can we do? We as a population could end our unending demand for cheep oil and succumb to reality thus starving radical Islam of one of its main propaganda tools. We can focus on special operations and human intelligence rather than shock and awe. We could get our President to summon the Saudis over to Crawford for a hand holding session and make the request demand that they limit or cease the funding of Madrasas across the MENA. Furthering this last point, we should focus more on institution's (particularly educational) rather than military aid to countries like Pakistan. For example, we gave Pakistan $256 million over five years (2002-2007) to reform and revitalize Pakistan's education system. Meanwhile, we gave Musharraf $821 million in Foreign Military Financing between 2002 and 2005. I know that schools are a bargain when compared to munitions and logistical support for an army, but compare that commitment to the (estimated, because why should a monarchy be transparent?) more than $70 billion Saudi Arabia has spent since 1975 "to spread Wahhabism outside the Kingdom through mosques, schools, and Islamic centers." Additionally, the Saudis are also able to export people with the skills necessary to maintain these institutions to the greater MENA. In short we are loosing the battle of ideas badly. We are fighting the radicalized product that our allies permit and our policies sustain.