The discussion covered areas such as terrorism, modernisation and the nuclear balance in the Middle East.
Since the September 11, 2001 attacks against the United States, Islamic extremists have been blamed for attacks as far apart as Amman, Bali, Istanbul, London, Madrid and Saudi Arabia, among others.
Queen Rania of Jordan told the audience that terror groups which used Islam to justify attacks had "led the Muslim world to a critical crossroads of self-examination and self-definition."
Pakistani President Pervez Musharraf argued that the tensions had more to do with Western, rather than democratic, values or modernisation.
"If you're talking of Westernisation, yes, that is in conflict with Islam and Islamic teaching because we have our different values," he said, adding it was normal for all cultures to maintain their respective identities.
But Hajim Alhasani, president of the Iraq National Assembly, argued that Muslim intellectuals and reformers saw more of Islam's core values outside the Middle East.
"They find Islam more in the West than they find it in Muslim countries," he maintained, because while Islamic philosophers had helped foster human values in the 19th century, "the problem with Muslim countries is that you don't find these values and principles implemented within the Muslim society.
"You find corruption everywhere and Muslim values are against corruption."
The parliament chief said that in Iraq: "We think democracy is a solution for Muslim nations."
Afghan President Hamid Karzai said it could be "difficult" to impose the sort of democracy that was presently "the accepted form of government all over the world".
Asked how the United States should help Islamic countries, the panelists' answers ranged from concrete -- money for Afghanistan and help resolving the Kashmir dispute between Pakistan and India -- to requests for cultural comprehension from Iraq and Jordan.
Queen Rania drew sustained applause when she replied: "Please take time to understand the Muslim world, what it is that we stand for. Don't try to influence Islam, don't try to manipulate it because that will just alienate us even more."
Over-simplification of the Islamic culture, she warned, "can be a very dangerous thing in this day and age".
Mr Karzai pointed out that many extremists now threatening the world with attacks "were trained by the West and the Islamic world together in the war against the former Soviet Union with billions of dollars."
Most came from outside his country and "the ones that were the most extreme were considered the best fighters."
Finally, a questioner from Bahrain asked the leaders whether they felt Iran, like Israel, had a right to be a nuclear power.
President Alhasani, President Karzai and Queen Rania said nuclear weapons should be banned worldwide, while Mr Musharraf replied simply "no", explaining later that it was because Tehran was not itself subject to a nuclear threat.
Mr Karzai, who livened up the debate several times, underscored that a ban on nuclear weapons should apply "to all countries, not only Israel and Iran."
Laughter broke out a second later when he turned to President Musharraf and said: "I'm sorry, I forgot you had one."