The article isn't online at the New Yorker's web site, but you can read it here, at the New America Foundation:
By early 2007, the back-channel talks on Kashmir had become “so advanced that we’d come to semicolons,” Kasuri recalled. A senior Indian official who was involved agreed. “It was huge--I think it would have changed the basic nature of the problem,” he told me. “You would have then had the freedom to remake Indo-Pakistani relations.” Aziz and Lambah were negotiating the details for a visit to Pakistan by the Indian Prime Minister during which, they hoped, the principles underlying the Kashmir agreement would be announced and talks aimed at implementation would be inaugurated. One quarrel, over a waterway known as Sir Creek, would be formally settled.
Neither government, however, had done much to prepare its public for a breakthrough. In the spring of 2007, a military aide in Musharraf’s office contacted a senior civilian official to ask how politicians, the media, and the public might react. “We think we’re close to a deal,” Musharraf ’s aide said, as this official recalled it. “Do you think we can sell it?”
Regrettably, the time did not look ripe, this official recalled answering. In early March, Musharraf had invoked his near-dictatorial powers to fire the chief justice of the country’s highest court. That decision set off rock-tossing protests by lawyers and political activists. (link)
And from there that it just went downhill for General Musharraf. Now, with weak and unstable new leadership in Asif Zardari, and a possible change in leadership coming in India as well this spring, it's unclear whether anything can be done anytime soon.
The actual details of the almost-agreement aren't spelled out entirely in the article, but we do get some promising inklings:
To outsiders, it has long seemed obvious that the Line of Control should be declared the international border between India and Pakistan--it’s been in place for almost forty years, and each country has built its own institutions behind it. Musharraf, however, made it clear from the start that this would be unacceptable; India was equally firm that it would never renegotiate its borders or the Line of Control. The way out of this impasse, Singh has said, was to “make borders irrelevant,” by allowing for the free movement of people and goods within an autonomous Kashmir region. For Pakistan, this formula might work if it included provisions for the protection--and potential enrichment, through free trade--of the people of Kashmir, in whose name Pakistan had carried on the conflict.
The most recent version of the nonpaper, drafted in early 2007, laid out several principles for a settlement, according to people who have seen the draft or have participated in the discussions about it. Kashmiris would be given special rights to move and trade freely on both sides of the Line of Control. Each of the former princely state’s distinct regions would receive a measure of autonomy-- details would be negotiated later. Providing that violence declined, each side would gradually withdraw its troops from the region. At some point, the Line of Control might be acknowledged by both governments as an international border. It is not clear how firm a commitment on a final border the negotiators were prepared to make, or how long it would all take; one person involved suggested a time line of about ten to fifteen years.
One of the most difficult issues involved a plan to establish a joint body, made up of local Kashmiri leaders, Indians, and Pakistanis, to oversee issues that affected populations on both sides of the Line of Control, such as water rights. Pakistan sought something close to shared governance, with the Kashmiris taking a leading role; India, fearing a loss of sovereignty, wanted much less power-sharing. The envoys wrestled intensively over what language to use to describe the scope of this new body; the last draft termed it a “joint mechanism.” (link)
Though fragile, this seems to me to be potentially workable, as it gives most parties a little bit of what they had hoped to get from a final resolution. Indeed, this story makes me feel somewhat optimistic, for once, about Kashmir. (If they did this once, they could do it again if and when political conditions are right in both Delhi and Islamabad.)
There's a great deal of other interesting material in Coll's article, including material related to the 11/26 attackers (definitely Pakistan backed, no surprises there) as well as India's troubling history of "disappearing" Kashmiri separatists. Overall, he has a very balanced and informed perspective (neither pro-India nor pro-Pakistan); it's well worth a read.