While President Bush talks about Iraq as the key to America’s fight against Islamist terrorism, the real key may lie with a Radcliffe graduate nicknamed “Pinkie” who now lives in London and Dubai.

I’m referring to Benazir Bhutto, the exiled Pakistani political leader and once one of the world’s highest-profile women leaders. She is reportedly negotiating with Pakistani President Pervez Musharraf over whether she can return home and share power.

Bhutto is no saint. Her two terms as prime minister were marred by corruption and disappointed many who admired her. But whether she and Musharraf can make a deal may determine whether Pakistan can confront a growing Islamist threat. That threat affects America, too.

Musharraf, a close U.S. ally with nukes, is being sharply challenged by Islamic extremists. In Islamabad, his troops recently stormed the central Red Mosque to remove militants who were trying to impose sharia law on the city. In revenge, terrorists have set off several suicide bombs.

Meantime, Pakistan is the probable base of Osama bin Laden. The recently released National Intelligence Estimate says al-Qaida’s main safe haven is not in Iraq. Rather, the group’s “top leadership” and “operational lieutenants” are holed up in wild, mountainous, tribal lands in northwest Pakistan on the Afghan border. Afghan Taliban also take refuge there and stage cross-border raids on their homeland.

Musharraf is also under fire from a middle-class movement that includes lawyers and other professionals. They should be his natural allies in the war against Islamists. But Musharraf, who took power in a coup, has manipulated subsequent elections, and the opposition is fed up with continued military rule.

That opposition was boosted recently when Pakistan’s Supreme Court exhibited a stunning burst of independence, and ruled against Musharraf’s efforts to suspend Chief Justice Iftikhar Chaudry. Chaudry was a potential obstacle to Musharraf’s effort to ensure his reelection as president while keeping command of the military. That dual role is likely to be challenged in court.

Many thoughtful Pakistanis believe the Islamists can be challenged only if Musharraf allies with civilian political parties against them. That would mean permitting the return of Bhutto and other exiled civilian political leaders.

Musharraf might make a deal to maintain power for a while in return for taking off his uniform and restoring civilian rule. As Najam Sethi, the well-known editor of Lahore’s Friday Times, wrote in the Wall Street Journal: “A transitional alliance of the military establishment with more progressive and secular elements in the country is the need of the hour.”

Such an alliance is vital to cope with Pakistan’s domestic Islamist problem, as well as with al-Qaida. No Pakistan expert with whom I spoke thought there was an immediate danger of an Islamist takeover of the country. Musharraf has purged the army. And Islamists have never gotten more than a small percentage of the national vote.

But creeping Islamization presents a dangerous threat over the next decade. Sethi writes that there are “over 20,000 madrassas (religious schools) controlling over one million angry students across the country.” This, despite a U.S. pledge, after 9/11, to help Pakistan reform the madrassas and fix its broken secular educational system.

Musharraf and the army, have never taken the domestic Islamist threat seriously enough. Moreover, the army uses radical Islamists as a resource to fight against India over control of Kashmir.

The profound question now is whether the storming of the Red Mosque means Musharraf understands the Islamists threaten him directly. The answer is not yet clear.

I asked the noted Pakistani journalist Ahmed Rashid whether a return to civilian rule would enable Pakistan to drive al-Qaida out of its territory. What would happen if the United States tried to send in troops, as the White house recently signalled it might?

“It’s no bloody answer for the United States to go into (the border territory of) Wiziristan,” Rashid replied quickly. “There has to be a political solution. It is vital to rally the nation (against the Islamists) and to get a civilian government to do it.

“People are against the (Pakistani) army going in because this government has no legitimacy. It is seen as going in at U.S. request. We need a government which can say, ‘This is for the sake of Pakistan.”‘

The return of Bhutto could help Pakistan confront its Islamists and al-Qaida. The White House should be encouraging her – and Musharraf – to reach such a result.