Only India knows if they will truly go to war with Pakistan or not. It's up to them. They have got to figure that if they go to war- Pakistan will use its nukes. So why wouldn't India just pull an overnight surprise nuclear first strike? If they were successful, they would take out Karachi and Islamabad and possibly key tactical targets- thereby hampering any effective response. The worst that could happen is Pakistan will respond with nukes- which, presumedly, they would do even in the advent of convential war. So really, what would India have to lose by going the first strike route?
Pakistan on the other hand must gamble that India will back down in the face of its threats to use nukes- because in the end, India could just be rattling sabres. So their best bet is not to use a preemptive first strike. They have to hope that with American military interest in the region Washington will be forced to calm India down, and normally I would be inclined to agree with them- but India is angry. They see us taking our war against terror to our enemy- why shouldn't they? The Israelis have uttered a similar complaint and I agree with them- they should be allowed to exterminate the terrorists that are killing them. The same goes for India.
I don't want to see some big nuclear war or anything, but I firmly believe India has a right to demand that Pakistan end this terrorist activity and if they do not comply India has the right to defend itself.