I fully agree with Wilson John that intervening at the PM's level in the Sarabjit Singh would only weaken India's position. I would certainly give the Pakis a handle on us, to use this as a barganing chip to get some more jehadi terrorists freed from Indian prisons.
The pursuit of peace with the Pakis is just an illusion. The only peace that the Pakis will offer India is the peace of the graveyard - when the whole of India would be a grave-yard. Do we need such a peace?