While making proper noises about the need for restraint and dialogue, government officials here can hardly contain their glee over India and Pakistan coming the closest in nearly two decades to clashing militarily over the disputed territory of Kashmir.

In the Pakistanis' triumphal assessment of this past week's developments, the renewed conflict has embarrassed their larger and more powerful neighbor into overreacting against a handful of "freedom fighters" inside Indian Kashmir. It also has exposed India as a territorial aggressor after two of its military jets were shot down several miles inside Pakistani Kashmir and focused world attention on an issue for which Pakistan has long demanded international mediation.

"The issue of Kashmir is now on the front burner," Mushahid Hussain, Pakistan's minister of information, said today. "The events of the last week clearly demonstrate that the long-festering, long-standing dispute . . . cannot be brushed aside. Kashmir is the core issue on which the future peace and stability of South Asia rests."

But other observers, both in Islamabad and New Delhi, are drawing different lessons from the flare-up. Some view it as a case of muscle-flexing by Pakistan's powerful and independent armed forces, which once dominated the country but may now fear becoming marginalized in a civilian-led society, especially since Pakistan successfully tested nuclear weapons a year ago.

While Pakistan's civilian leaders have been reaching out diplomatically to India, an effort capped by the historic meeting of both prime ministers in Lahore, Pakistan, three months ago, some experts say Pakistan's armed forces have a vested interest in keeping alive the Kashmir conflict. The Himalayan region has brought India and Pakistan to war twice and is still heavily militarized on both sides of the 450-mile line of control.

"Lahore or no Lahore, national security is still the purview of the Pakistani armed forces," said Maj. Gen. Ashok Krishna, director of the Institute of Peace and Conflict in New Delhi. "The army doesn't want to relinquish its position in society, and its aim is to dismember India. . . . It may keep the civilian authorities informed, but it does not want any interference."

Bilateral tensions have eased since Thursday, when Pakistan claimed it had shot down two Indian fighter jets over Pakistan's portion of Kashmir. Pakistani Prime Minister Nawaz Sharif and Indian Prime Minister Atal Bihari Vajpayee spoke on the phone Friday, and Sharif offered to send his foreign minister to New Delhi next week in an effort to defuse the situation.

But India has yet to accept the offer, and some Indian analysts said diplomatic initiatives are unlikely to bear much fruit as long as the Pakistani military continues to support the cause of Kashmiri insurgents. Several hundred of them are now dug into mountaintop positions. Indian ground troops and airstrikes have failed to oust them since May 6.

[Indian jets continued to attack guerrilla targets in Kashmir today, despite the Pakistani offer to hold talks on the crisis. Pakistan, meanwhile, returned the body of a downed MiG-21 pilot to India. Indian officials questioned how the pilot died, telling reporters he was thought to have ejected safely from his plane but had bullet wounds on his body.]

"This is a clear case of aggression and there is only one solution: the intruders must leave," said K. Subrahmanyam, a defense expert in New Delhi. "The government has no choice but to move forward diplomatically, but it will be meaningless as long as the army keeps up such tactics. . . . They are threatening civilian authority in both countries."

Pakistan has repeatedly denied Indian charges of abetting the insurgents, although officials here say they provide moral and political support to a "popular, indigenous" movement by Kashmiris who seek self-determination and freedom from Indian rule. The Indian-controlled portion of Kashmir is occupied by several hundred thousand troops.

Now, authorities here charge that India is the aggressor in the current flare-up. They say it is using the insurgency as a pretext for sending thousands more troops into the region and launching airstrikes, for which the true purpose is to push Pakistani forces away from the border area, secure territorial advantage and possibly attempt to occupy the strategic Siachen glacier.

But some observers here, in an argument that mirrors that of their counterparts in New Delhi, wonder who is calling the shots on India's Kashmir policy: civilian or military authorities? They note that a caretaker government is running the country and awaiting elections and that hard-liners in the defense and policy establishment have been pressing civilian leaders to teach Pakistan a lesson.

"A weak Indian government is caving into the hawks in the military," Shafqat Mahmood, a liberal Pakistani senator, wrote this week. The armed forces "initiated and instigated" the airstrikes because they were humiliated and frustrated by the insurgent infiltration from Pakistan, he argued, and "the caretaker Vajpayee government just did not have the guts to stand up and say no to the use of the air force in a volatile area."

Other experts here expressed concerns that as India's elections approach in September, if continued airstrikes fail to drive out the insurgents, Vajpayee may come under even more pressure to look tough and "settle scores" with Pakistan, thus raising the chances that the conflict could spiral out of control.

Although both countries' successful nuclear tests will probably act as a deterrent to full-fledged war, they suggested, they also have dramatically altered the region's military landscape in ways neither country has yet fully digested and have added an uncertain new dimension to any renewed hostilities, such as the current crisis over Kashmir.

"Both countries are testing each other's limits, setting new rules of the post-nuclear game," said Rifaat Hussain, a political scientist in Islamabad. "In Kashmir, they are playing a game of brinkmanship to see how far the other side can tolerate a low-intensity conflict. It's a dangerous game, and if the civilian governments want it to end, they need to sit down and negotiate."

Special correspondent Rama Lakshmi in New Delhi contributed to this report.

CAPTION: Flexing Power: Indian soldiers load heavy artillery during last week's bombing that was sparked by Pakistan's "freedom fighters."

CAPTION: Patrolling the Line: India's security forces guard its border with Pakistan in Kashmir, which has become a flash point for the governments and military.

CAPTION: Renewed Hostilities: Pakistani demonstrators burn an Indian flag to protest that nation's air raids over the disputed area of Kashmir.

CAPTION: Battle Souvenir: Pakistani army officers inspect the wreckage from one of two Indian jet fighters their nation shot down last week.