I agree with you that demands won't work, and will probably make things worse. I think the danger of the sort of anti-China propaganda that we're seeing is that it's becoming an emotional groundswell quite similar to the anti-Saddam groundswel that preceeded the Iraq war. Not quite as bad, but there could always be some minor event (a plane shot down accidentally, a person detained, etc.) that would rapidly transform things into an irrational state where we'd have politicians seriously calling for warlike behavior.
I think the most important bottom line is that for the vast majority of Chinese people, the status quo will be better for their future and their families than if the US enacts sanctions or intervenes militarily. If we advocate making those people worse off (through sanctions, etc), we should realize that doing so without any cost to ourselves entails great hubris -- the core hubris of neoconservatism.