On the topic of the Taliban in Swat: Before we start talking about how we should deal with them, let's bear in mind that it's not us who is dealing with them at all, but the Pakistani government. So sailorjack, your comment about whether "we" should be going for "Western-mandated regime change" is a bit off the mark. This isn't a question of whether the West or the US should institute "regime change" in Swat, it's a question of what approach the Pakistani government should take towards a part of their own territory where their effective control/authority has been usurped by a rebel group.

So, with that noted, my own opinion would be that no, the Taliban in Swat should not be treated as a legitimate governing organization at all, and they should not be negotiated with or compromised with at all in the hopes that their rule there can later be gradually weakened or moderated. They should be removed--driven out, hunted down, exterminated--by the Pakistani government which has lawful authority over Swat district.

If the Taliban presence in Swat existed with the popular support of the region's inhabitants, if it reflected the will of the people of Swat, I would be more sympathetic of the idea of negotiating with them. In such a situation, violently expelling the Taliban would probably be politically unproductive and perhaps counterproductive for the Pakistani government (it would probably do nothing but intensify the popular attitudes that invited/supported that presence in the first place). But as I understand it, the Taliban presence in Swat is not particularly popular, and exists largely due to the Pakistani government's bungling and it's ineffective policing of the northwest frontier province. As I understand it, the Pakistani government's weak grip on Swat basically allowed Taliban groups to begin opportunistically slipping into the district and setting up their own parallel local governments based on gun-law rather than any broad popular support. (To a certain extent, they enjoyed some popular support initially based on their Pashtun makeup and their imposition of Sharia in a what is a deeply religious region which the central government had not been serving well in terms of law and order, but most of what I've read has suggested that this popular support declined pretty quickly as people in Swat saw the full picture of what the Taliban are about.)

Aside from the total inappropriateness of a national government coming to terms with a militant group which have taken advantage of government weakness to set up their own state-within-a-state inside the country's borders, I don't think that the basic character of the Taliban 'government' in Swat makes it realistic to hope that they'll eventually compromise or moderate themselves out of existence if temporarily catered to. This is an organization in which leaders or factions who are seen as too moderate or too willing to compromise are constantly being supplanted or hedged out or shifted towards irrelevance by more radical elements that stop listening to them when this perception arises. As long as the overarching Taliban movement is being supplied with radicalized young militants, this is going to happen and their local branches or affiliated groups are going to stick close to the more extreme end of the ideological spectrum. We can see this in the way that Sufi Muhammed (the guy who founded the Taliban group that took over Swat, no less) has lost influence and authority in the eyes of the younger fighters under Maulana Fazlullah as his views have moderated.

This, combined with the fact that their ideology explicitly rejects most of the elements of modern states and societies, along with many things that most people (including Pakistanis) would consider elements of normal everyday life, suggests to me that trying to reach terms with the Taliban in Swat isn't a good policy for the Pakistani government. I'm not generally opposed to the idea of governments pursuing a negotiated settlement with rebel/insurgent/whatever groups in the interest of avoiding bloodshed and destruction, but in this particular case, due to the particularly radical and intractable nature of the group involved, I would say it's a dead end and no good would come of it. The Taliban have simply got to go, they have got to be beaten and destroyed.