Diplomacy is the art of saying "nice doggie" until you can find a rock.
For the U.S. to stage an all-out war on Islam at this stage in the game would be positively disastrous. For Bush to attempt to lead such a crusade would destroy his career and reputation.
What Bush is trying to do here is a sort of reverse psychology: downplay the evils of radical Islam, and let reality play them up. If Bush were to say radical Islam was evil, liberals would be blind to any attocities commited in its name. But by downplaying it, Bush makes the liberals accutely aware of such attrocities when they occur.
I like that.