Muslim terrorists choosing their target in a Muslim country (Malaysia) is a ridiculous scenario.
Not really. Muslims bomb within their own countries all the time.
Well, not entirely. Malaysia isn't exactly a unified, monolithic Muslim nation like Saudi Arabia. There is a lot of tension between Malay Muslims and "the rich" Chinese and Indian minority groups who control much of the economy. The skyline of Kuala Lumpur didn't get that tall through the efforts of Malay Muslim witch doctors, at any rate. It's not inconceivable that the hijackers had a domestic target in mind.