Gurkha,
I don't doubt what you're writting, but I can't help but think as I look at the statistics showing reduced violence in Kashmir since 2001 that it has something to do with the conflict in Afghanistan, and that after ISAF withdraws and the issue in Afghanistan is resolved one way or the other that violence will once again increase in Kashmir.
Tell me where I'm wrong.
The conflict in Kashmir is as much a state versus state (Pakistan and India) conflict as an internal conflict, so even if the average Kashmiri isn't excited about fighting for the reasons you listed, it seems probable that Pakistan will continue to send foreign fighters into Kashmir to stir up trouble even if they can't mobilize the population. Currently Pakistan is too busy with Afghanistan and dedicating their resources there to help the insurgents in Afghanistan.
It may not be an insurgency, but it will likely continue to be a fight against foreign militias until the issue is resolved between India and Pakistan.
Thoughts from an outsider.
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