Without getting off-topic on whether nukes are moral or immoral, there are plenty of reasons why using them to fight this enemy is not a good idea.
As Wanderer pointed out, these people are wolves in sheep's clothing. They don't have a country, they don't have cities, they're decentralized and hide among the civillian population. Using a nuke will make certain that we're responsible for killing thousands of innocent people in addition to creating even more martyrs for the cause.
If the United States is going to make any real difference in the Middle East, we have to lead by example and show that we're there to punish the bad guys and protect the good guys. I agree that we can't take the appeasement route, because you simply can't reason with fundamentalists. What we can do is show the upcoming generations that we aren't the indiscriminate killers that our enemy's propoganda says we are.