Seems like a pretty good breakdown, I agree that on the diplomatic side suspending Russia from the G8 should be done, and cancel the meeting, which I've heard most if not all of the other countries (UK, Canada, Japan, Germany, France, Italy) are ready to agree to this, as well as some strict economic sanctions. Obviously we want to avoid war, but you can't let Russia just do what they want. If they want to advance further into the country, then I'd say force is likely needed, similar to what happened in the first Gulf War. It's a difficult situation for sure, you need to smack em down but try to avoid a big ass war. I'm certain for all of Putin's talk, if the US, UK, and Canada sent over forces to the area with orders to fire he would back off in a second like a pussy, because he knows it's a war he'd get spanked in. However if you do that and he does have a deathwish, then you have to be worried about potential nuclear actions. Which is why regardless of what happens, you don't follow them into Russia and push that can of worms. Probably going to require a mix of hard and soft power to teach them a lesson, just have to be careful. Too little and he doesn't learn, too much and nukes could fly. In the end I feel Putin is pressing to see just how far he can go, so you stop him there, and let him beat himself. Putin's popularity in Russia fluxes pretty wildly, in December they were the lowest since 2000, in the low 40's, and now they're highest since in inauguration of 2012 in the high 60's (likely due in part to Russia's good showing in the Olympics). However if he pisses everyone off, even China, get's booted from the G8, has uprisings in Crimea, and facing harsh economic sanctions that could be problematic for reelection. Of course since Russia moved to 6 year terms, he's got till 2018, so there's plenty of time for things to change, and he'll be pushing 66 so he may not want to serve until he's 72.
Tricky situation, but two things are certain, Putin sucks and he needs to be smacked down a bit. This is why I couldn't ever be president, I'd just drop a Delta Team in there and tell them to not do anything to him, just leave a Presidential Coin for him to find. Then call him up and say "See that? That's how close I can get, next time they'll be speaking the international language of 5.56"
