Last August, a NEWSWEEK reporter received a phone call from the spokesman for a senior Taliban leader, inviting him for dinner at a popular restaurant in Peshawar. The reporter replied that he was already there. As he looked around, he saw the smiling jihadist sitting a few tables away. They shared a kilo of Afghan barbecue as the spokesman confidently talked about the Taliban's resurgence in Afghanistan and how comfortable they felt operating inside Pakistani cities and in the frontier tribal area. "The biggest chink in Musharraf's armor is his failure to move against the Taliban, particularly in the cities," says Samina Ahmed, the South Asia director of the International Crisis Group in Islamabad. "The brains, the ones who plan the operations, are not necessarily in the boonies or in the sticks, they're in cities like Quetta. Can he pick them up? Easily."

Taliban fighters say they are careful not to antagonize their hosts; the attacks against Pakistani troops have generally been conducted by Pakistani tribals, sometimes with the support of Qaeda operatives. But that's a fine distinction. "If you take away that support the Taliban are getting from across the border in Pakistan, it would be much easier for U.S., NATO and Afghan government forces to confront the Taliban inside Afghanistan," says Ahmed. Each group may have its own agenda, but they all share a visceral hatred of America and its regional allies—including Musharraf. The Taliban also work closely with Qaeda leaders in the tribal regions, planning attacks together and pooling their skills.

The Taliban presence began to grow out of control after Musharraf, his Army bloodied by incursions into South Wa-ziristan, cut a peace deal with the tribal region's Mehsud clan in 2005. He made another such truce with tribal militants in North Waziristan in 2006. The ceasefire agreements were publicly announced as treaties with tribal elders. Nothing could be farther from the truth. The deals were made directly with the militant leaders, their frontmen or terrified tribal elders who did the militants' bidding. As a result they were worthless: the militants had no intention of keeping their promise to stop the passage of arms and fighters across the Afghan border. While the Army halted offensive operations and dismantled checkpoints, the militants helped the Taliban and Al Qaeda regroup and reinfiltrate back into Afghanistan.

Those forces, all working together, have brought the Afghan jihad home to Pakistan. Within the tribes' ancient mud-walled fortresses they run training courses for insurgent recruits and suicide bombers. Some graduates travel to Afghanistan to fight beside the Taliban. Others will stay in the tribal area to fight the Pakistani Army, while others are sent out to hit targets in places like Karachi. Several terrorist plots in Britain have been traced back to the tribal areas.

Now the Pakistani government is bearing the brunt of the attacks. The threat turned critical in July, when more than 100 militants died in a weeklong shoot-out with government forces at Islamabad's Red Mosque. In retaliation, tribal suicide bombers have managed to penetrate highly guarded military facilities in the capital, the Army headquarters at Rawalpindi and elsewhere, killing scores. Authorities say that until the showdown, the Red Mosque had served as a way station and munitions depot for hundreds of fighters shuttling between Pakistan's cities and the tribal areas. It reopened Oct. 3, and preachers there are once again denouncing Musharraf and his partnership with the West. A similar message was delivered to Bhutto before she came home. Last week, speaking by satellite phone from the South Waziristan tribal area, a senior militant commander named Haji Muhamad Omar called Bhutto an agent of Washington. "She doesn't come back by her own choice. The United States and Britain are bringing her back to fight against the mujahedin," he said.

The militants dominate in areas beyond the tribal areas as well. Armed groups have effectively seized control in places like the picturesque Swat Valley, where a jihadi leader named Mullah Fazlullah rides a black horse and commands hundreds of men under the noses of a nearby Pakistani Army division that seldom leaves its barracks. Peshawar is perhaps the most important production and distribution center for Taliban and other Islamist material. Jihadi CD and DVD shops abound. One small shop features large posters of the notorious Taliban commander Mullah Dadullah Akhund, who was killed in Helmand earlier this year, and pictures of Guant?namo inmates in their orange jumpsuits behind barbed wire.