As far as my understanding ,Nukes is one of the reason ,we haven't had war with Pakistan in the recent past .Also keep in mind, this isn't 1945, we are living in 2011.Even a single use of Nbomb can result in full scale world war .
Though Pakistan is only country ,I fear the most who can use them if they feel they are losing .
What about Kargil war ? You forget that Kargil war happened after Pakistan acquired nuclear weapons. The only reason why there hasn't been a war is because Pakistan is busy internally and on its western border, India has decided to adopt a taciturn response to terror and that US is in the neighbourhood.
A responsible powerful country like India would only use its nuclear weapons as a deterrent not as an offensive/defensive weapon. A rogue nuclear powered country like Pakistan can be expected to use nuclear position as a matter of policy. And furthermore Pakistan as its policy has threatened to use Nukes against India, in case its survival is threatened by any country.
India is working on it CS doctrine which seeks to operate within Pakistan's nuclear threshold. Pakistan as a counter has floated plans of using nukes tactically and within its territory to stop the Indian advance. Please read ColdStart doctrine to understand what is the Indian Army's thinking in detail.
Problem with India's CS doctrine and Pak's counter doctrine/nuclear policy is that there can be rapid escalation by the other in response. Not sure if WW3 can happen but if there is a perception that WW3, it is good for us. India should always portray that it is even madder than Pakistan when it comes to nuclear weapons, and will gladly want Pakistan to use one so that it decimate Pakistan inspite of losing half of India. The crazier Indian military, politicians sound when it comes to nukes, the more pressure will be on Pakistan both internally and by the world community. This is what India did successfully in Kargil thereby bringing it hostilities to an end quickly, and this gun to the head policy is what Pakistan has adopted successfully to get aid and avoid punitive actions despite its duplicity.
--
Now, there are a lot of ways by which we can increase Pakistan's nuclear threshold and call their bluffs
1. By strengthening our covert capabilities in Pakistan. So that we can take out MJC(Military-Jihad complex) assets covertly
2. By strengthening our Anti-terror capabilities in India. Fewer terrorist attacks would mean we can take decisive action in case of a rare attack.
3. By supporting Anti-establishment elements within Pak, covertly and overtly.
4. By putting pressure on USA, China and Saudi the three countries that are propping up the Pakistan state.
5. By increasing trade with Pak, which can ensure atleast partial cessation of terror activites in India by the business lobby.
6. Rapid Military modernisation and realization of CS doctrine by Indian armed forces
7. By using our clout to economically and diplomatically punish Pakistan
8. By threatening to use nukes incase of a strike by Pakistan, to not only decimate Pakistan but also decimate all friends of Pakistan.
9. Placing strike corps in such a manner so as to dismember Pak incase of any Pak escalation.