Most of the blame for the stalemate rests with the Centre. By not talking to the Hurriyat for four months after A.B. Vajpayee announced a ceasefire in November, it opened all those who had welcomed the ceasefire and called for a dialogue with New Delhi to the charge of having sold Kashmir out. In the first weeks after the ceasefire, the relief Kashmiris felt at the cessation of violence made this an acceptable, even popular, proposition. But as time passed without any consolidation of the peace through negotiations; as jehadi attacks multiplied and the Kashmiri police retaliated (often against former militants and innocent civilians), the relief was replaced by anger. This made the position of the 'moderates' who had welcomed the ceasefire increasingly untenable. Inevitably, they had to harden their position to retain their credibility among the Kashmiris.
In retrospect, it's clear New Delhi's second mistake was to make a formal announcement about Pant's appointment. Had that only mentioned talks with the Hurriyat and a few other secessionist groups, it would have raised a howl of protest from the National Conference and other political groups, notably in Jammu and Ladakh, who want to remain part of India and would therefore have felt betrayed. To avoid this, the announcement made it clear New Delhi intended to talk to all groups, including non-political ones like trade unions. This worsened the Hurriyat's dilemma, for it raised the price of a dialogue to include not just the abandonment of the Pakistan trip but also acceptance that it was no different from groups that hadn't shed a drop of blood in defence of Kashmir's ethno-nationalism.