While the Pakistani military is quick to tout the success of its military in Swat, other developments show the country has a long way to go in tackling the native terrorist problem.

Today, the Lahore High Court released Hafiz Saeed, the leader of the terrorist group Lashkar-e-Taiba / Jamaat-ud-Dawa. Saeed was placed under house arrest after the UN declared the group a terrorist entity just weeks after the deadly November 2008 Mumbai attacks. Saeed was released despite the government's presentation of evidence linking Saeed to al Qaeda.

Several days ago, police captured a senior terrorist leader that established a terror camp in the northwest and was behind two recent suicide attacks that targeted security forces in Islamabad. The terrorist and a former member of parliament were detained outside the home of radical cleric Maulana Abdullah Aziz, the leader of the Red Mosque. Aziz was arrested for inciting a rebellion in the capital in the spring of 2007. Pakistani troops captured him during the siege of the Red Mosque. He was released in April and immediately preached jihad. Aziz was not detained in the May 2009 raid despite his connections to the Islamabad terrorist commander.

Here is what two US intelligence officials who closely track the situation in Pakistan told me just this morning:

"Forget what you are seeing in Swat," an intelligence official closely watching Pakistan said. "More than six months after Mumbai, there has yet to be a single conviction or even a trial of anyone involved in the attack. Pakistan does not have the capacity to try and convict known terrorists."

"Saeed is untouchable, And don't think the courts and the police don't know this," another official said, warning that the continuous release of leaders like Saeed, Red Mosque leader Maulana Abdullah Aziz, and others is sending a terrible message to those on the front lines against the terror groups.

"As long as he and other like him are free, Pakistan will remain a terror state," the official said. "Until Pakistan shows it is serious about taking down the leadership of the Taliban, Lashkar-e-Taiba, Jaish-e-Mohammed, these groups will regenerate and prosper. And law enforcement in Pakistan will shy away from taking them on."