Watching several Western governments mince their way through the maze of radical Islam and moderate Islam leads me to this conclusion:
For Western officialdom, a moderate is defined as a Muslim who does not publicly advocate terrorism against the West (excluding Israel).
Nothing else matters: not advocating for an Islamic takeover in the West (e.g., Siraj Wahhaj), not advocating terrorism in other places (e.g., Yusuf al-Qaradawi), not volunteering oneself for suicide terrorism elsewhere (e.g., Azzam Tamimi), nor covertly advocating terrorism in the West (e.g., Tariq Ramadan). It's a dismayingly simple, superficial criterion.
As for my thoughts on the matter, see the long list of questions at "[Finding Moderate Muslims:] Do you believe in modernity?" For individuals whom I think make the cut, see 'Bibliography – My Writings on Naming Moderate Muslims." (September 3, 2005)
Dec. 13, 2005 update: Reviewing the work of the British Home Office task force, "Preventing Extremism Together," put together after the London bombings in July, Dean Godson reaches the same conclusion as I do here, though he makes it even a little bit more restrictive:
So what, then, does the Home Office mean by the much hallowed-word "moderate"? It is now apparent that "moderate" does not necessarily mean liberal or progressive. In this context, a moderate is opposed to the use of violence in the United Kingdom — although there was no unanimity on the panel about its employment abroad where Muslims are "oppressed". In other words, such "moderation" is often methodological, rather than ideological.
June 24, 2006 update: Michael Gove agrees in his stinging article, "To allow Islamists to direct the post-7/7 debate was a disaster."
the biggest failure of all in the battle against Islamist extremism has gone practically unnoticed. Tony Blair has acknowledged that the fight against Islamist terrorism cannot be restricted to a police action against isolated individuals or small groups. Last summer he spelt out that a much broader effort is required to tackle, at root, the ideology of Islamism that has bewitched so many minds. But in the struggle against extremism the British State has failed to tackle the underlying ideological currents that favour Islamism. Organisations such as the Muslim Association of Britain (MAB) and the Muslim Council of Britain (MCB), whose members have shown sympathy for extremist positions, are rarely challenged, and certainly not publicly by the Government or its agencies.
