He's saying that he'd tell them that aid is contingent upon doing what we feel is appropriate regarding Bin Laden and his ilk. That's a version of an ultimatum, which is a threat.
If Musharraf is dragging his heels, it's perfectly fair for us to leverage him in this way, but we can't expect him to do something that could topple his government. We don't know all the reasons that are in play in his mind and among his advisers, but sure, we can make demands and withhold aid if he doesn't toe the line. What's not okay is to call this nudging or coercion "working with" him. That's a mis-characterization.
These are the actual quotes:
"As President, I would make the hundreds of millions of dollars in U.S. military aid to Pakistan conditional...Pakistan must make substantial progress in closing down the training camps, evicting foreign fighters, and preventing the Taliban from using Pakistan as a staging area for attacks in Afghanistan. I understand that President Musharraf has his own challenges. But let me make this clear. There are terrorists holed up in those mountains who murdered 3,000 Americans. They are plotting to strike again. It was a terrible mistake to fail to act when we had a chance to take out an Al Qaeda leadership meeting in 2005. If we have actionable intelligence about high-value terrorist targets and President Musharraf won't act, we will."
COMPARE THAT WITH THIS:
"Chris, respectfully, and you and I are close friends, but you obviously didn't read my speech because what I said was that we had to refocus, get out of Iraq; make certain we are helping Pakistan deal with the problem of Al Qaeda in the hills between Afghanistan and Pakistan but Chris, if we have actionable intelligence on Al Qaeda operatives, including bin Laden and President Musharraf cannot act, then we should."
There are a few interesting points here, but look at these:
Suddenly, he was never talking about "Pakistan", but "the hills between Afghanistan and Pakistan". First off, there's no such place; it's either Afghanistan or Pakistan. Secondly, he's LITERALLY CHANGING WHAT HE SAID so people will be misled into thinking he never said "Pakistan" proper.
What's worse is he's characterizing "Pakistan must make substantial progress" as "helping Pakistan deal with the problem". The former is a demand with the stated consequences of withholding aid, yet he's characterizing it as if he was going to sit down as semi-equals and lend a hand in a presumably friendly way. A threat is not the same as help, and if Obama's going to play fast and loose with reality like this, I'm not the only one who's going to bring it up.
One last bit--and this is significant too--is the substitution of "cannot" for "won't". In the original statement, he says this would be in an instance where Musharraf "won't act" (which means "chooses not to act") whereas in his rewriting of history, he says that he'd said this would be in a situation where Musharraf "cannot act" (which means that he's unable to). That subtle change makes it sound like we'd be helping Musharraf if his hands are tied by domestic influences. The original statement intimates hostile unwillingness or duplicity from Musharraf, whereas the sanitized version of history makes it sound like even more of a last resort and one where Musharraf is unable to act. Mr. Obama is a lawyer and he's very used to the extreme differences of the uses of these two different verbs.
This is an issue of character and judgment, and he's blundered on both. That doesn't make him unfit for the job just yet, but if it continues, it does for me. I have a BIG problem with distortion of the truth, and I'm not alone. Even if people are soft on deception, they probably don't want someone who's going to get so easily caught.
He needs to get his act together, and he needs to stop telling us what he's said unless it's actually what he said. The internet is here, and a president is always on the record; that means that someone auditioning for the part has to accept that reality too.