Islamism is a reaction to modernity, not to repression. It would grow regardless. With the shackles off in Egypt, Libya and Tunisia, watch it grow even more. To think that it will diminish because it is not repressed is a dangerous fantasy. Thanks to the Arab Spring, it now has the opportunity to seize control and most likely will do so. Democratic elections have simply revealed the strength of the view that "Islam is the answer."
"Calls for Sharia to become state law emerged only in the twentieth century, as a result of Islam's encounter with the West."
Really? Sharia existed for many centuries before this encounter. The first call for state sharia enforcement came from Ibn Taymiyya in the late thirteenth century when he declared the Mongol rulers (converts to Islam) apostates because they continued to live by their tribal law, rather than by Sharia. Taymiyya laid the basis for requiring a ruler to enforce sharia if he wished to maintain his legitimacy, which is why Taymiyya is so popular among the Islamists today. The only recent sharia states have been Saudi Arabia, Taliban Afghanistan, and Sudan - those with the least amount of exposure to the West. In any case, the sharia enforcement issue emerges from the struggle within Islam, not from the encounter with West.
"The Qur'an is politically agnostic and says nothing about the preferable form of government."
Not quite. In Surah 3:110, the Qur'an speaks of the regime in Medina as "the best community (or nation) ever raised for mankind." Since the Qur'an is understood by almost all Muslims as coexisting eternally with God, this statement means that the Medinan concept of the "best community" obtains forever. This is why the Salafists desire to emulate it exactly, and why every major effort of reform in Islam goes back, instead of forward. It may also help explain why democracy has never arisen indigenously in the Arab Middle East.
"Salafists ... practice Osama bin Laden's creed of Islam."