What to do with Pakistan? In the week the jig was up finally for the wily and wilful Pervez Musharraf, most of America's leading foreign policy experts were stumped on a key element of George Bush's so-called "war on terror".

The specialists, more than 100 of them, conclude that under the Musharraf-Bush axis, Pakistan went from bad to worse. They say the US has failed to manage a conflict zone, which a greater number of them than in a similar survey a year ago now judge to have had a negative impact on American national security.

Two-thirds of these experts see Pakistan as al-Qaeda's most likely new home-base. And in a poll by Foreign Policy magazine, 69 per cent of them rate it as the country most likely to transfer nuclear technology to terrorists. But amid such gloomy certainty, it is the what-do-we-do-now question that throws them.

Asked if US forces charged with capturing or killing al-Qaeda leaders should be allowed to gatecrash Pakistan, the response is startling: 18 per cent think "yes"; 17 per cent say "no". The remaining 65 per cent are "unsure".

With the war on terrorism set to enter its eighth year, this imperfect country has all the potential to be the perfect terrorist storm.

Musharraf seized power by a bloodless coup at a 1999 way-point in Pakistan's cycles of political failure. And when it came time for the US President to spin the dictators' wheel-of-fortune after the September 11, 2001, attacks, Musharraf was a runaway winner.

A US-led invasion force would be dispatched to Baghdad, to drive Saddam Hussein from power. But in Islamabad, Musharraf was to be showered with billions of aid dollars, shoring up his military dictatorship and cloaking it with a legitimacy that could not be bought. Saddam did not have nuclear weapons - Musharraf did.

With Washington's backing and funding, Musharraf created a tissue-thin veneer of democracy for his regime, holding it all together until a brain-snap early last year, when he decided the country's chief justice was out to get him - so he sacked the jurist.

Musharraf twice took the subcontinent to the brink of war, on the back of his support for violence in Kashmir.

After the coup, Musharraf promised democracy, but he sacked the judiciary and had his opponents rounded up in the night. When he needed more clout, he formed an alliance with the fundamentalist political parties.

His promise that he would rein in the support of the military and security services for al-Qaeda and the Taliban was hollow, as was his undertaking to restrain the madrassas schools that nurture Islamic fundamentalism.

The artistry in his leadership was a deftly played double-game. He told Washington what it wanted to hear and banked the aid cheques. Meanwhile, he allowed fundamentalists to make themselves at home, regrouping and retraining in mountain sanctuaries believed to be the new home of the al-Qaeda leadership - including Osama bin Laden.

Along the way, many locals have been radicalised, creating a Pakistani Taliban that has taken over much of the west of the country and now is moving on big cities. Al-Qaeda, the Taliban and the other Afghan insurgency groups have made Pakistan's wild west their new base of activity, striking at will in both countries against US and NATO forces, which include a contingent of Australians.

Setting out the strategic objective of any counter-insurgency as a need to "win, hold and build" both territory and popular support, Anthony Cordesman, of the Washington-based Centre for Strategic and International Studies, condemned Musharraf's Pakistan: "[He] pursued a strategy of lose, halt and accommodate."

To travel in Pakistan these days is a frightening experience. The western city of Peshawar is encircled by the Taliban and last year Islamabad was treated to the spectacle of a months-long siege in which hundreds of stick-wielding, black-clad women took over a school complex in the heart of Islamabad.

In the border region, the fundamentalists make heroes of 12-year-old boys by having them do the knife-work in beheadings. They make DVD-recordings of the acts for distribution in the bazaars.

Tribal elders and mullahs who oppose the fundamentalists are murdered by the dozen. Hundreds of people have died in recent clashes and tens of thousands were displaced in a regional war while Washington was slow to question Musharraf's sincerity.

Hundreds of girls' schools and video-shops are being torched; and the last year has seen weekly mass-death attacks and bombings, including the murder in December of the campaigning former prime minister Benazir Bhutto and Thursday's twin suicide attack on a munitions factory near Islamabad, when more than 60 were killed.

During a Herald assignment in Pakistan last year, senior military figures openly mocked the US. One of them declared: "Most of us simply do not believe the US version of the 9/11 attacks."

As in the Afghan capital next door, what passes for a government in Islamabad today is proof that free and fair elections don't necessarily produce genuine democracy - the dictator is finished; the generals are back in their barracks, but no one believes they have surrendered their power; and the new ruling coalition is an endless tug-of-war between two clans consumed by their own sense of entitlement as much as they are haunted by their corrupt pasts.

It is six months since Pakistan's fragile governing coalition was elected. In that time, much of its political and personal energy has been dissipated in arguments about what to do with Musharraf. Now that he is gone, they argue about what to do without him.

The biggest of the coalition partners is the Pakistan People's Party, headed by the slain Bhutto's widower, Asif Ali Zardari. Next in size is the Pakistan Muslim League-N which is headed by Nawaz Sharif, an industrialist and a two-time former prime minister who was elbowed into exile by the Musharraf coup nine years ago.

Spite and squabbles were expected to be kept under wraps for some months. But Musharraf's seat was still warm when the feuding burst into the public arena.

What needed to be a powerful acknowledgement of a new democracy - reinstatement of the judiciary sacked by Musharraf - has become an embarrassing first test of wills.

Zardari baulks at having the chief justice back because he once refused Zardari bail when he was jailed on corruption charges. Worse, Zardari apparently worries that Chaudhry might undo the amnesty deal under which he was absolved of a string of corruption charges before returning from exile last year. Sharif insists that Chaudhry's reinstatement is a deal-breaker for the coalition.

Zardari wants to indemnify Musharraf and let him walk. Sharif wants to subject Musharraf - and by extension, the military - to a humiliating trial after which he should hang. By contrast, when the Musharraf coup brought the Sharif prime ministership to a rude halt in 1999, Sharif swapped his Pakistani prison cell for a palace in Jeddah, Saudi Arabia, under an amnesty deal.

The new leadership has failed to reach agreement with the military on how best to tackle the incendiary mix of extremist Islam and guerilla war which grips the whole western flank of the country. And they are at each other over who should be the next president.

Reports from Islamabad say Zardari is Washington's preferred leader. But the stage may be set for a more complex drama as Sharif, whose party ranks second in the coalition, lures Musharraf loyalists to his tent, in the hope that he might challenge Zardari.

Given the track-record of the Pakistani generals, altruism is the last motive that can be read into their adoption of a low profile. In the absence of verifiable proof, it must be assumed the military has decided merely to lie low in the hope the new civilian administration will take the heat of a popular backlash over any crackdown on the Islamist fundamentalists.

But the military has not sheathed its sword. When the Interior Ministry announced three weeks ago that the controversial Directorate of Inter-Service Intelligence, the national spy agency, was to be removed from military control, the generals took it badly - and within hours the decision was reversed.

The Pakistani lawyers were courageous in taking to the streets last year to protest against Musharraf. But the millstones of history and vested interests could prove too great a weight for their slender, black-suited shoulders as they attempt to steer their fractured country towards genuine democracy.

Paul McGeough is the Herald's chief correspondent.