Actually, I think Libya found a bombing campaign to be more persuasive than the "international community's" blathering.
Hardly - after the raid they stepped up their attacks, culminating in Lockerbie. It took ten years of sanctions to force them into a situation where they had to negotiate, but it has appeared to work.
Of course, the reason why it has worked is because the West used one of its three great advantages - namely overwhelming economic power (the other ones are overwhelming military strength and modern science) in the form of sanctions to eventually break them. Sanctions arent useful for immediate action or politically glamourous, but they - when rigorously imposed - do work.
We could use that same advantage against the rest of the region - if we could lose our addiction to petroleum, the entire region would return to the irrelevant backwater it was prior to the discovery of oil. They have, in recent years, diversified, but nowhere near to the extent required, and its very difficult to inspire people to blow themselves up when you are poorer than they are.
And for my English friends who are so quick to give contemporary and socio-economic excuses for the evil of Islam
Its hardly excuses. To identify and fight your enemy effectively you must understand him. There is a world of difference between Hamas and al-Qaeda, as others have noted - and if what happened to the Palestinians happened instead to us, I think we all know what we would be doing. Wolverines!
My only objection is to your assertion that the legitimately political groups like Hamas and (to some extent) Hezbollah can be negotiated with. I see the reasoning, but I think you're making an error that almost all people do when assessing professional terrorists/freedom fighters. You (and most others) seem to forget the fact that the leaders of these groups do this stuff for a living. To keep their jobs (and Swiss bank accounts - see Yasser Arafat) they must either win completely and come to power or keep on doing what they're doing. Islam and politics aside, that's a whole lot of self-interest to fight. The history of negotiations in the region shows that the leaders of this sort of group either refuse to accept concessions (why agree to put yourself out of business?) or immediately find some other grievance upon which to justify their campaigns.
That is what happened to Fatah, and its a big reason of why they were kicked out. There isnt a similar body of evidence about Hamas, and diplomatically they are a bit of an untried force, because Israel has pretty much refused to negotiate with them.
Moreover it would be wrong to limit that to just the Palestinians - there have been Israelis who have sought to, at times, kick things off for their own ends (Ariel Sharon being the most immediately obvious example).