Yes, Muslims (the people) are nationalistic. But No, Islam (the religion itself) does not promote any sort of nationalism. Islam supports ONE Islamic state, and ONE Islamic ruler/government/Khalifah for all Muslims... This is what some people claim to be fighting for (although in reality an Islamic state can not and will not prosper out of violent acts) and the so called Mujahideen need to realize that, and educate themselves and the people instead of trying to fight a battle that cannot be won through conventional warfare for obvious technological and economic disadvantages that they have. Whereas others in the Middle East are fighting for a Nation, lines that Men drew on a map... Israelis and Palestininans killing eachother for decades, Genocidal acts of Saddaam Hussein, the Saudi government opressesing foreigners in their country. All for Pride, in their people, who are not much different from the people in the neighboring countries.
... basically Sadaam Hussein was not doing anything for Muslims he was doing them for Iraqi's. A selected few Iraqi's... And all of a sudden we have Muslims accross the world pretending Hussein was a great man, thinking he's some sort of Hero for Islam.