I finally finished reading Thomas F. Madden's New Concise History of the Crusades last night, while MrsDarwin was finishing up the online version of John Derbyshire's novel.
One thing that struck me was his section at the end about the legacy of the crusades, which he splits into a section on the European legacy and the Arab legacy. He make s appoint which smells right to me, and so I'll summarize here since it doesn't seem like it's often discussed.
It's a common assertion that "the Middle East has a long memory" and that the region has been simmering against Europe ever since the crusades marked the beginning of European ascendancy and the beginning of Islamic decline. There are two problems with this view, however, the first is that the crusades were (in the long run) a strategic failure. The crusader states lasted less than two hundred years, and Jerusalem was only Christian for 88 years. Now, on the time scale of nations, that's not too bad. Two hundred years is a decent run. However, the crusades certainly didn't mark the beginning of Western expansion and imperialism. Far from it, after defeating the crusader states the Dar al-Islam went on to overrun the Byzantine empire, Greece, Eastern Europe and even besiege Vienna in the 16th century. It wasn't until the 17th century that it became clear that the Turks would not overrun Europe. So however offensive the crusades may have been to Muslim pride, they clearly did not mark the beginning of their cultural decline, but rather a brief pause in their expansion.
As to whether the crusades represented the beginning of a bitter struggle between East and West: it can hardly have been seen so at the time. Rather, it was one in a long series of wars between the Dar al-Islam and the Christian world. During the time that the crusader states existed, they were just one more piece of Middle Eastern political world: sometimes allied with the Byzantines, sometimes allied with one or another of the Islamic emirates.
Most interesting to me, though, was the question of when the crusades became 'an issue' in the Middle East. Madden argues that this didn't really happen until the 1800s, indeed, that the crusades were virtually forgotten in the Middle East until that point. In a sense, this is perfectly reasonable. From the Islamic point of view crusades represented a brief series of setbacks in the spread of Islam, but a temporary one. Indeed, the first Arab history of the crusades apparently wasn't written until 1899.
However, when the French, English and other colonial powers moved into the Middle East in the 19th century, some of them brought with them a rationalized and romanticized history of the crusades: one in which they represented the beginning of the great age of European colonialism. As colonials taught this version of history in Middle Eastern schools, the crusades became inextricably connected with Western colonialism in the minds of many Middle Eastern historians. And so as colonialism came to be seen as one of the principle evils of the 19th and 20th centuries, the crusades came to be seen as the bloody beginning of European colonialism. And so we have the state of Israel, the first Jewish state in nearly two millennia, being seen as a renewal of the crusader kingdoms, because it is (a doubtless unintended) a legacy of Europe's colonial adventures in the region.
One final note, apparently Saladin was a relative unknown in Arab history up until the colonial period. Perhaps not surprisingly. Saladin was a Kurd (to this day an unpopular group in the region) and his successors quickly fell into civil war, allowing the crusader states to roll back most of his victories. Up until fairly recently, the Arab hero of the crusades who attained folkloric status was not Saladin but Baybars, who defeated the Mongols and pushed back the crusader states some 75 years after the time of Saladin. Saladin re-entered the Middle Eastern popular history of the crusades through the European understanding of him: as a chivalrous opponent of Richard of England and Philip of France.