Can Islam be saved? Sure, in theory. Christianity and religious Judaism—with scriptures just as perverse, inhuman and barbaric as the Koran—have pulled off the trick. It requires dismissing 95% of the plain declarative statements of the Torah and the Bible as "metaphor" and (for Christians) ignoring 99% of the history of their religion, but centuries of sophistry, rhetoric and staggering intellectual dishonesty has made it possible for an ordinary person to profess Christianity and Judaism keeping both her civilized humanistic values and, more importantly, a straight face. There's no reason that Islam couldn't, at least in theory, apply the same techniques to the same end.
Islam, however, isn't anywhere near embracing the double-think and willful ignorance that has rendered Christianity and religious Judaism sufficiently vacuous to coexist peacefully with Humanistic and Enlightenment civilization. Part of the problem is that the Koran is much more uniform, unambiguous, and univocal than especially the Christian Bible, and makes much less use of intentional metaphor. But if Jews and Christians can interpret away the literal meaning of Leviticus, there's no reason that Muslims can't do the same to the Koran.
I'm neither interested nor qualified in Koranic exegesis to help with the detailed implementation of the required sophistry, but I can at least help point the way. If the Islamic cultures wish to peaceably coexist with the West, there are some core values they're going to have to force into their scriptures.
It is not—perhaps surprisingly—necessary to abandon the notion of the universality of Islam. Everyone should, I think, live her life as if her core principles were universal; in just the same way, if your values are good enough for you, why shouldn't they be good enough for everyone else? If everyone in the world were to freely convert to Islam, then Islam would be universal. But free conversion is the key. Happily, the Koran provides easy substantiation for this concept: "Let there be no compulsion in religion" [Sûrah al-Baqarah: 256] Half the problems between Islam and the West would be solved if this motto were absolutely privileged. (That Allah repeatedly violates this principle, sending unbelievers to Hell—which sure sounds like compulsion to me—just makes the challenge interesting.)
Freedom of speech and freedom of religion are not just decadent affectations, they're core principles of a free society. To this end, Muslims must—to coexist with the West—shrug off the fact of apostasy, blasphemy and criticism, and address the substance of that criticism. Everything is subject to criticism: Some criticism will be accurate, some full of shit, but you have to handle each argument case by case.
In responding to criticism, remember that Islam is as Muslims do. It's not enough to deflect criticism just by providing a particular interpretation of the scripture. For such a rebuttal to have rhetorical force, the contrary interpretation must have actually currency in interpretive authorities, social norms, and legal systems. It's simply not enough to cite al-Baqarah 256 out of one side of your mouth and condone the murder of apostates and "blasphemers" out of the other.
It's also important to respect national sovereignty. The West—especially the United States—has failed to respect Muslim's (and many others') sovereignty, but two wrongs don't make a right. It's one thing to denigrate Rushdie, Ayaan Hirsi Ali and others like them; it's one thing to execute apostates in your own country; but calling for their murder contrary to the laws of their nations of residence crosses the line. Note that this point does not cover acts of war; war is a horse of a different color, and "civilized" standards of war is an oxymoron.
In the same vein, Muslim immigrants to Western nations need to fully comply with the laws of that nation. You cannot seek special exceptions, and religious authorities cannot ever condone transgressions. You may, of course, use the democratic processes in place to try to change the laws, the absolute prerogative of every citizen.
The whole subjugation of women thing has got to go. Calling this subjugation "protection" is just putting lipstick on a pig. Equal civil rights, equal protection under the law, full integration and fully equal participation in society is the standard. There's no room for compromise here, and again, the failings of the West—especially as these failures are minor in comparison with Islam—are not excuses: Islam isn't even trying.
Intellectually, Islam has to understand the difference between faith and reason. If you want to have faith—belief without evidence or proof—that's one thing, but stop pretending that there's any rational justification for your religion. By definition no religion can be rationally justified.
There are, of course, many failings of the West which substantially contribute to the conflict with Islam: Exceptionalism, imperialism, the United States' war of aggression in Iraq and indefensible occupation of Iraq and Afghanistan, Israel's injustices against the Palestinians. Islam's failures, no matter how barbaric and grotesque, do not justify our own sins. In just the same way, however, our own sins do not justify the failings of Islam.
The West has certain core values, which we sometimes honor more in the breach than the observance. We're improving our civilization the hard way, through democracy and rational discourse, and it's a slow process. But we are trying, and we are, on the whole, making progress. We're about five hundred years ahead of Islam, but there's no reason Islamic culture can't catch up quickly.
Our core values allow considerable latitude in the specific values in other cultures, societies and nations: Muslims don't have to put up Christmas trees nor do Muslim countries need to legalize alcohol or pork to coexist with the West. But we're not going to back down on the core values, and so long as Islam acts contrary to those values, coexistence is impossible.