For many years you have acted as enablers by not saying 'no' in unequivocal, unifed fashion to Chinese leaders who demand that China be addressed on the same level as democracies.
So I don't know which is sillier: your calls for dialogue between the Dalai Lama and China's leaders, or the assertion by the Speaker of Tibet's Parliament in exile that world leaders "must use the Olympics to force China to conform with international rules."
By listening to the Dalai Lama on how to deal with China you are acting like relatives of a drug addict who clutch at a sermon to justify giving the addict one more fix.
Get it straight: it is not your place to lecture China because you long ago killed off all respect that China's leaders had for you by not sticking to your principles.
Your place is that of an enabler; that's the place you fell into after you repeatedly betrayed democratic values in your dealings with China. So this not about China. This is about you. You learn to deal with yourselves. You recognize what you are in relation to China's leaders, then correct your behavior.
As for the Olympics -- just don't go. No fancy speeches, no ringing explanations; just give your regrets and don't go. That is the kind of advice any psychologist would give people who plead to know how to help an addicted family member. Just stop giving him dope.
Learning to stop being an enabler is not rocket science; the hardest part is confronting the destructive aspect of an obsessive co-dependent relationship.
So you don't need to ponder how to deal with China. You need to phone a psychologist who specializes in dealing with co-dependents. If necessary, you need an intervention.
What's that? Okay I'll show you. First you need to recognize that while humans are not by nature stupid they can be conditioned to act stupidly. So while the actions of Chinese leaders toward Tibetans are not your fault, it is your fault that they stupidly assumed they could get away with their actions by throwing a tantrum if you crossed them.
How to correct your fault? You need to find strength to resist the temptation to go on treating adults as if they're two year's old as the way to keep peace in the family. For this an intervention can be necessary. There are two types of intervention, often deployed in stages. The first stage is external, physical intervention:
You tell me to lock you in a room because you're feeling the overpowering urge to undertake "confidence building" measures in response to China's leaders throwing a tantrum at you.
Then you spend the next 12 hours pounding on the door and yelling that I'm going straight to hell if I don't open the door immediately.
You spend the next 12 hours offering me a $100 billion in cash if I'll unlock the door.
The next 12 hours are spent telling me that whatever bad happens to China will be all my fault because I didn't let you out.
When if finally dawns on you that you're using the same strategies on me that China's leaders use on you, I unlock the door.
The second stage is self-intervention. If you don't feel you have enough strength of will to resist old habits of behavior, you find help in maintaining resolve from a support group -- which you have readily available in the form of the citizens you represent and your relationship with other leaders of democratic nations.
And you learn to fall on your knees frequently and ask whatever higher power you believe in to give you Nelson Mandela's tenacity.