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Well, maybe the Germans didn't "pull a Fallujah" because of Dresden, but I'm sure they mostly didn't do it because the German civilians were not fanatics that thought they had nothing to lose, because they planned a better life for their kids and for themselves, and did not fantasize about 72 virgins awaiting them for unearthly pleasures.

That being said, I couldn't agree more with your proposition of a strict, martial order. Razing Fallujah means having another city-sized riot the following day, be it in Iraq or elsewhere in the Arab world. Mercilessly tracking and eliminating insurgents, while at the same time maintaining the order with an impartial iron grip is the best way to handle the situation and have the Iraqis prove where they stand.

Discipline, honor and restraint may not be the funniest way to win the battle, but it's the only reasonable thing to expect from professional soldiers.

I wasn't really advocating razing Fallujah, I just don't think that people should be allowed to dishonor dead American's without penalty. A quick Apache or AC-130 strike would have been fine with me, not to kill everyone, just enough to get the message. I was in a pretty bad mood last night, so I admit some of what I advocated may have been a little to harsh.
One last thing, I don't think you realize just how fanatical the Germans really were. Tens of thousands of Russian soldiers died storming Berlin, killed by armed German civilians fighting to the last man. Part of the reason the Germans after the war weren't quite so hard to govern as the Iraqis are now is that almost all the fanatics were killed in the final battle for Berlin.