Defiant, educators insist their schools are unfairly targeted in a campaign against Islam.

"This is Western propaganda to defame Islam. They blame Muslims for everything," said Maulana Rahat Gul, 85, who runs Markaz Ulum-e-Islamia Islamic school in Peshawar, a city near the Afghan border.

Pakistan has been a prominent ally in the US-led war on terror since the September 11, 2001, attacks.

But calls for tougher action against the madrassas have escalated since reports that one of the four alleged bombers in the July 7 London bus and subway attacks visited two such study centers during a trip to Pakistan.

As a result, President Gen. Pervez Musharraf [Images] walks a fine line in his efforts to curb radicalism in religious schools: Heavy-handed tactics alienate many in his Muslim nation, but any perception of lenience frustrates his Western allies.

Since September 11, Musharraf has survived two assassination attempts allegedly organized by al-Qaeda.

On Sunday, British Defense Secretary John Reid said Pakistan's religious schools were contributing to increased terrorist activity, and that his government was discussing the problem with Musharraf.

"I think that people do recognize that the madrassas, literally schools in which terror is taught, are a major source of international instability and contribute largely toward the growth of terrorist activity," he told CNN.

Inside the madrassas, students of all ages read and study only the Quran, Islam's bible. Because the religious schools are free, parents who can't afford Pakistan's fee-based state schools often send children as young as 5 or 6 to a madrassa just so they can start getting some education. But older students -- anyone who wants to learn about Islam -- can attend.

Pakistan cracks down on madrassas   

Western leaders also claim Pakistan continues to tolerate alleged Islamic extremist terror training camps, even though Pakistan insists that all al-Qaeda militant bases along the Afghan border were destroyed during Pakistani army operations in 2004.

"We need to call on Pakistan to shut down these training camps," Rep. Jane Harman of California, the top Democrat on the US House Intelligence Committee, told Fox News.

"A lot of these people we're apprehending (in the war on terror) have links to Pakistan," she said. "Musharraf has said he doesn't condone terrorism, he's going to change the teaching in the madrassas. He needs to move a lot faster."

Since the July 7 London attacks, Pakistani intelligence agents have questioned students, teachers and administrators at one school in central Lahore [Images] and at least two other radical Islamic centers.

The agents showed around photographs of and documents about Shahzad Tanweer, the 22-year-old Briton of Pakistani origin who allegedly blew himself up on a London Underground train -- and who twice attended madrassas.

US to give Pakistan $100 mn to monitor madrassas   

Islamic religious figures who condemned the bombings were quick to defend the madrassas as unconnected to the attacks.

"Raiding madrassas and blaming them for involvement is like interfering in Pakistan's internal matters," said Riaz Durrani, a senior figure from the pro-Taliban Jamiat Ulema-e-Islam party who runs a madrassa in Lahore.

In the 1980s, some religious schools sent students to fight the Soviet occupation of Afghanistan, a struggle coordinated by Pakistani intelligence agencies with CIA support and funding. Today, many of Pakistan's 8,000 madrassas are threadbare operations that take in the poor.

"Most operate on a neighborhood basis and are sustained locally, and they are not by any standards militant," Pakistan's Dawn newspaper said in an editorial. However, it said some madrassas get generous funding through "clandestine channels," a custom the government is trying to stop.

Some 200 students study in Gul's school, a large two-story building surrounding a mosque with tall minarets. In classrooms, students squat in a semicircle on brown carpets around a teacher sitting at a low desk.

Gul, wearing a white flowing beard and Islamic skull cap, criticized government efforts to regulate religious teaching and to monitor school funding and students. The madrassas, he said, have nothing to do with terror.

"Enemies of Islam and hypocrites have been trying for a long time to eliminate the status of madrassas and change their syllabus," he said.

"Our schools are open for everyone. ... Islam strongly opposes terrorism. We give only moral and religious education based on the Quran. Islam means peace."

More reports from Pakistan