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It goes on to say the Koran offers only two alternatives regarding the captives - free dismissal or ransoming - without referring to enslavement.
(Ref: http://members.tripod.com/maseeh1/advices7/id227.htm)

The official website of Middle East Media Research Institute, http://www.memri.org, recently posted a summary of an article from another website, probably run by Chechens. This article has different views on the issue of treatment of prisoners under Islam.
(Ref: http://memri.org/bin/opener_latest.cgi?ID=SD43402)

The article under reference is titled "A Guide to the Perplexed Regarding the Permissibility of Killing Prisoners," which appeared in the column "Jihad News from the Land of the Caucasus".  In this the author suggests that the Islamic religious scholars present five different alternatives, drawn from the various interpretations of the Koran:

1) A polytheist prisoner must be killed. No amnesty may be granted to him, nor can he be ransomed.
2) All infidel polytheists and the People of the Book (i.e., Jews and Christians) are to be killed. They may not be granted amnesty, nor can they be ransomed.
3) Amnesty and ransom are the only two ways to deal with prisoners.
4) Amnesty and ransom are possible only after the killing of a large number of prisoners.
5) The Imam, or someone acting on his behalf, can choose between killing, amnesty, ransom or enslaving the prisoner.

The above two are diagonally opposite views of Islam about the treatment of prisoners.

How is one to arrive at a rational opinion regarding what Islam really says on this issue?

The best way, I believe is to look into what Islamic scriptures have to say. Of course, the most authentic source of Islam is the Koran itself and after the Koran it is the recorded traditions of the Prophet known as the Hadis. Of all the four most well known traditions, the one compiled by Imam Bukhari is deemed to be most authentic.

On the question of taking prisoners and freeing them with ransom, Sahih Al-Bukhari records
"It is not fitting for a prophet that he should have prisoners of war (and free them with ransom) until he has made a great slaughter (among his enemies). You desire the good of this world (money or ransom) but Allah desires (for you) the hereafter, and Allah is All-mighty, All-Wise." (Sahih Al- Bukhari, vol. 4, pp. 161)

This is claimed to be as Statement of Allah.

What should be done with the warriors of the defeated people?

When the  tribe of Bani Koreiza was defeated, they were ready to accept S'ad's judgement. So the Prophet sent for S'ad who was near to him. S'ad came and sat next to the Prophet who said to him, "These people are ready to accept your judgement."  S'ad issued his judgement that the their warriors should be killed and their children and women should be taken as prisoners." The Prophet then remarked, "O, S'ad! You have judged amongst them with (or similar to) the judgement of the King (Allah)." (Sahih Al-Bukhari, vol. 4, pp. 176)

It is worthwhile to note that the Prophet did not intervene to say that the prisoners should be freed but commended S'ad's judgement as  "similar to judgement of the King (Allah)."

As a consequence all the seven or eight hundred men of the Jewish tribe were put to death in one day and the women and children sold into slavery and the spoils divided among the army. The same day her husband and all her male relatives were killed, the Prophet invited Reihana, the Jew to be his wife; an offer she declined, and chose to remain his slave or concubine. (The Life of Mahomet by Sir William Muir)

Many commentators claim Islam prohibits killing of women and children. While there is a hadith where the Prophet prohibits killing of women and children (Sahih Al-Bukhari, vol. 4, pp. 160) but there is also a Hadith that says a raid on the enemy should not be abandoned just because it might endanger the lives of women and children. (Sahih al-Bukhari, vol. 4, pp. 158-159)

Thus the incidental killing of women and children has the sanction in the traditions of the Prophet. In the aftermath of 9/11, the oft repeated contention that killing of women and children is not allowed in Islam is not true.

It is not surprising that some Muslims conquerors have followed the practice of killing the prisoners and defeated combatants. To give one example: Hajjaj, the governor of Irak asked Muhammad bin Kasim to lead an expedition on Sind in 712 CE. Chach-nama - historical account of Sind -- records "after the conquest was effected, and the affairs were settled and the report of conquest had reached Hajjaj, he (Hajjaj) sent a reply to the following effect:

"O my cousin; I received your life inspiring letter. I was much pleased and overjoyed when it reached me. The events were recounted in an excellent and beautiful style, and I learnt that the ways and rules you follow are comfortable to the Law. Except that you give protection to all, great and small alike, and make no difference between enemy and friend. God says, -- Give no quarter to Infidels, but cut their throats. Then, know this is the command of the great God….."  (The History of India as told by its own Historians by Elliott and Dowson, vol. 1)

Beside this the Muslim conquest of India is full of Hindu prisoners being made slaves and sold in the markets of Ghazni and beyond, forced to convert to Islam at the point of sword and killed for refusing to do so. Timur Lang's killing of 100,000 Hindu prisoners in one day is unparallel in history.

Yes, there were times when the Prophet spared the lives of the prisoners but generally it was on one of the two conditions - either they converted to Islam or accepted the status of dhimmies and paid the jiziya. Muslim conquerors of India have followed this practice also.

In its posting, www.memri.org summarizes the article saying the author prefers the position that "the Prophet Muhammad had dealt with the prisoners in different ways to maximize the benefits to Muslims."

The position that "the Koran offers only two alternatives regarding the captives - free dismissal or ransoming - without referring to enslavement" does not have much basis. The underlying message that one gathers is whatever is good for the Muslims and serves the interests of Islam is valid.