My gut response is "eye for an eye"... but:
A man murders a family in some grotesque way. Do we convict this man's entire family and murder them in the same way?
We strive to punish only those responsible for crimes.
At the end of WW2, did we execute every German? or every member of the Nazi party?
If this was an act by a small INDEPENDENT group, I don't see any other recourse beyond capturing/executing those responsible.
If this was an act of war by a government, then surely we are justified in declaring war and taking the necessary actions to win with minimal losses to our side.
The question is what level of support to a small group constitutes an act of war by a supporting government?
I am glad it is not my job to decide who lives and who dies. I am sure I would consider nuking a city, maybe even push the button myself, but I would carry the guilt of knowing that the thousands or even millions that would die in such a counter-attack would only add to the tragic loss of innocent lives that already forced me to make such a decision.