First the point I agree with you on: Islam, as it exists today, the way mainstream clerics and believers interpret it, is a problem. It was never tamed by age of enlightenment or liberalism, as Christianity and Judaism were (and arguably, Islam is more violent in the first place than at least Christianity). Because of that, way too large numbers of Muslims sympathize with islamist terrorism, and support measures and ideas that are in contradiction to our Western values.
That said, moderate and modern interpretations of Islam do exist. Just that they're unfortunately much less numerous than in case of other religions (so far). As examples, I'd mention the Ankara School or the Ahmadiyya Muslim Jamaat. Look them up if you want to learn more.
And then, much more important: Just like in case of every other religion too, there is a damn huge number of Muslims who simply don't take their own religion very seriously, or even give a **** about it. You know, just like Christians who don't pray or go to church, except for weddings or funerals.
Also, islamism (the ideology that drives terrorism in the name of Islam) is an ideology that is based on a very specific interpretation of Islam and incorporates many political demands and views. It is just as much a political ideology as it is a religious one, and it significantly differs from orthodox Islam or even mainstream Islam, even if the latter may not be without problems either.
Lumping all these people together, as if Islam was the Borg collective, is extremely ignorant. And it doesn't help us finding solutions either. The only thing it will do is fueling hatred against Muslims in general, creating backlashs, and that's playing into the hands of the islamists.