Throughout the conflict in Iraq, I've heard it claimed that Muslims aren't capable of a secular government - that their culture and religion would never permit it. Many people seem to forget or be unaware of Turkey. This is a nation that is about 95% Muslim, yet they have a completely secular government. The Turkish government goes even further than the U.S. government in not allowing religious dress in public buildings. This law has apparently been upheld in the European Court of Human Rights as "legitimate". Given France's recent move to disallow the Muslim head dress in public schools that's not surprising.
This brand of 'enforced secularism' is not something I find proper. In the U.S., anyone can wear the garments and symbols of their faith. The idea that the government could tell them not to would seem absurd and a violation of personal liberty to most Americans. The European system seems to take the perspective that the Government should be telling religious people 'you can't bring your religious stuff in here' and so on. Meanwhile, the approach of the U.S. government is that secular government is a government that is restricting itself - not restricting citizens. For instance, when the U.S. supreme court ruled against school prayer, the ruling was that government employees may not lead the students in prayer or use school property to conduct it. Students, however, are perfectly free to pray when and how they wish. The overall philosophy is a 'hands off' restriction on the government. In Europe, it seems to be more of a 'hands on' active secularizing of the people through intrusive restrictions. I find this harmful to personal liberty.
In any case, this more extreme European secularism is strongly in place in Turkey, and has been since 1923. According to a recent AP article, About two weeks ago, about 300,000 Turks (presumably many of them Muslim) staged a massive protest against Prime Minister Recep Tayyip Erdogan for his pro-Islamic agenda. Today about 100,000 protested. The protesters claimed his faction wanted "to drag Turkey to the dark ages". They also disapprove of Foreign Minister Abdullah Gul's wife, Hayrunisa, living in the palace while wearing traditional Muslim dress.
I would conditionally tend to think that both democracy and secular government are fully within the ability (and desire) of all human beings, including Muslims. However, when a nation doesn't have the past tradition of it like Turkey, it can be a long uphill climb. Ideally, not something that can (or should) be imposed from a foreign force, as is the attempted case in Iraq. But regardless of other immense problems with the Iraq war, I must at least say that claims Muslim populations are incapable, in principle, of secular government seem greatly inaccurate.