Church or state is still too narrow. A vibrant society needs other power centers, too. Allowing international media and companies will help.
I think democracy in the Middle East is possible but it will be a long and arduous journey because what will be required,essentially, is a cultural transformation. Too many people equate democracy with democratic elections but (as Palestine has recently shown) it entails much more than that. It necessitates a class of people who intellectually and philosophically believe in and understand what a democratic system requires - in terms of politics, economics, and social values. It means an educational system for the young that begins to teach them these things -- not madrassas that inculcate hatred and brainwash them in jihad. It also involves an understanding of the common good and general welfare that has to transcend bitter party and factional animosities. And it requires an understanding that a democracy isn't instantly created but must evolve and improve itself through the democratic process itself. It's my opinion that more Middle Easterners who receive a "Western" education should go more easy on the scientific and technical subjects and start to emphasize the classics and the great literary and philosophical works that form the basis of a truly enlightened civilization. With respect to religion, Islam presents a unique problem but somehow Islamic societies and nations must create distinctions between what is "secular" and part of a public domain and what is "religious" and part of common belief and worship. At the risk of Americanizing the problem, you must learn to separate "Mosque and State." This may be impossible - unlike Christianity which emerged within classical civilization, and experienced humanism, paganism, a reformation, wars of religion, a counter-reformation, a rationalistic and scientific Enlightenment, and many other historical forces that shaped it, and it in turn shaped, Islam in many respects is still a captive of its ancient Arabian past and genesis. The fact that Israel is the only true democracy in the region proves this point. When Israel became a state in 1948 it wasn't created "ex nihilo" but brought with its people the values and learning and culture of Western civilization -- which it helped to create and which in turn shaped it.