Place: Peace Bridge, India-Pakistan border. Day: Wednesday. Indian and Pakistani authorities are racing to finish preparations for a bus route between divided Kashmir on Thursday, deploying everything from sniffer dogs to ancient poetry.

Workers are repainting the bridge over the frontier a neutral white, erecting welcome signs and painting buildings along streets through which the bus will pass green - a holy colour in Islam.

But behind the Bollywood movie set-style makeover is a serious threat from Islamic militants to one of the most emotional and concrete steps in the peace process between the nuclear powers in years.

"I am 90 per cent sure it will pass through smoothly. They might try to disturb it... but they can't sabotage it as it will earn them a lot of ill-will from the local population," said an army commander in Srinagar.

Militants, who have threatened to turn the bus into a coffin, detonated a bomb along the route on Tuesday, injuring several civilians. Soldiers found and defused two more.

On Wednesday, militants attacked the bus yard and set the passenger safe house in Srinagar on fire.

The passengers were hiding in a heavily fortified government compound in the city after rebels published their names and addresses.

A dry run of the service on Monday was cancelled because of security fears.

Political analysts say the rebels fear allowing relinking Kashmir and letting Kashmiris mingle will weaken their support.

"The biggest advantage of the bus service would be start of a intra-Kashmir dialogue, formally and informally, because ordinary Kashmiris will get a chance to see the other side," said Ershad Mahmood, of Islamabad's Institute of Policy Studies.

"This will lead to better understanding amongst Kashmiris."

It is a small step. Even if things go well, the fortnightly run will carry barely 30 people from each side, and no freight.

Bigger steps have been taken: restablishing regular air, road and rail services between India and Pakistan, returning diplomatic missions to normal staffing and high level diplomacy.

But for Kashmiris, opening the divided land for the first time is the most important.

"If this kind of thing continues, then maybe we will get to the point where we will get rid of the militancy and there will be a better life," said Farooq Ahmed Lone, a 25-year-old student in Uri, the last main town before the border on the Indian side.

Kalim Bahadur, a former lecturer at New Delhi's Jawaharlal Nehru University, said the bus service - coming 10 days before Pakistani President Pervez Musharraf visits India - could change the whole dynamic of the peace process.

"The bus service has brought some changes in the atmospherics between India and Pakistan and if this is successful it may end up doubling the speed of the process," he said.

There is a feeling of pleasant expectation and celebration.

In Muzaffarabad, colourful bunting has been strung up along the main street, which also been lined with flower pots.

Uri residents and businesses have strung up banners in the main street welcoming their kin from Pakistani Kashmir. Fairy lights have been strung up around Srinagar.

India has repainted every roadsign along its rough 120-km stretch of the highway from Srinagar to the border at Kaman Post, on the banks of the mighty Jhelum River.

Even army bunkers have been freshly painted. Artillery guns that fired often into Pakistan until a ceasefire in 2003 have been hidden away under camouflage netting or new tin fences.

Like the peace process itself, passengers face a difficult and dangerous ride. The 170-km dusty highway from Muzaffarabad to Srinagar clings to the steep, forested Pir Panjal mountains, perilously close to an often straight drop thousands of feet to the surging Jhelum.

The road is swept daily for mines. In places, it is single lane and the wheels of the 19-seater buses come within inches of a sheer drop. Each of India's buses bears the ancient Kashmiri couplet: "I broke the sword and made sickles out of it".

Portraits of Musharraf have been erected in Srinagar - the first of any Pakistani leader here - and along the highway are billboards featuring happy Kashmiris with Indian soldiers and slogans such as: "The call of the Valley is the call of Peace".