You cannot play with a mad dog.
The key to separation of church and state in predominately Christian lands was invented by Jesus Himself when he said, "Render unto Caesar that which is Caesar's and unto God that which is God's" and "My kingdom is not of this Earth". Therefore it was possible to remove the power of people who had set themselves in the place of God without conflicting with religion.
Islam at its core is an ideology of government with some religious trappings. Islam does not exist apart from government. That is, even when Islam exists side by side with other religions in a democratic secular society, Islam is a top-down heirarchical structure unto itself within the larger society, with the ultimate goal of taking it over like a cancer. And woebetide it if Islam reaches 51%.
Islam of today, after billions of dollars of effort to radicalize it is bad indeed. Islam, as a religion in and of itself is a bad bunch of nonsensical theology. However, if you reflect back before Saudi Arabia, and Iran infused billions on pushing the fanatical aspect of Islam, you would realize that many Moslem nations had liberal population. Moslem women in miniskirts were all over Arab capitals in the sixties! Thinkers and observers who really know what they are talking about like Mr. Pipes, and myself (at the risk of sounding conceded) can attest to that wave of fanaticism/radicalization as a fairly recent phenomenon. It is reversible only if we put our minds, determination, and money to do it. Today with wall to wall coverage of the Islamic terrorism there is hardly one single observer/reporter who brings up the history of Islamic radicalization of late, and ties up to the Iranian revolution funding, and the sudden petrodollars windfall in Saudi Arabia after the oil embargo.
The "war on terror" is a failure if we do not use orchestrated ideological war. The military will win a battle, but as they say how you going to win the peace. Or as Mr. Freedman of the N.Y. Times said it before our invasion: "I am sure that we will win over Saddam, but then after we occupy Iraq, how are we going to deal with its population"? He also said: it is similar to a dog running after a car, when he catches up with the car, what is he going to do about it?