With the international community threatening sanctions if he fails to act positively in the next 10 days, he must now decide whether to escalate the tension he has created, or to sit down and negotiate seriously.
This test of his political mettle could not be played out over a more intractable problem. The Kosovo question has threatened to pit Albanians and Serbs against each other in armed conflict since 1989, when the province's Albanian majority lost their autonomy and found themselves subject to a police state controlled from Belgrade.
Long before the current killing spree, the Albanians cut off all relations with the Serbs and created their own parallel state as a prelude to a full independence. The Serbs, meanwhile, refused to let the province go, vaunting their nationalist attachment to the land of the first Serb rulers and the seat of the Serb Orthodox Church.
While President Milosevic's government has continued to insist that Kosovo remain Serb, the reality is that fewer and fewer Serbs are staying and only the repressive police presence has prevented an Albanian takeover.
The paramilitary attacks on rural villages, dressed up as a campaign to root out Albanian terrorism, have actually served President Milosevic quite well in domestic politics: he has created consensus in the fragile coalition government and distracted attention from their desperate economic problems.
But now he has to deal with an enraged outside world. The six-nation Contact Group imposed a number of punitive measures last Monday and threatened further sanctions if progress towards a solution was not apparent by 25 March.
Essentially, President Milosevic has three options: he could resume the police attacks and escalate the conflict; he could use the threat of war as an excuse to give Kosovo away; or he could keep sowing confusion and milk the crisis for all it is worth.
The advantage of the first option, total force, is that it would keep alive the nationalist dream that brought him to power. The disadvantage is that Serbs have been deeply disillusioned by the Yugoslav wars of secession and have little stomach for another fight. An already impoverished Serbia probably could not survive another bout of deep international isolation and could be devoured if the conflict sucked in the Albanian communities of Macedonia, Bulgaria and Albania itself.
The advantage of the second option, capitulation, is that Kosovo cannot be maintained by force alone and risks becoming a serious political liability as the Albanian population swells and Serbian numbers dwindle. If Kosovo remains within Serbia, it could be just a few decades before the Albanians can outvote the Serbs - not just in their own province, but in the country as a whole.
The disadvantage is that capitulation would never be swallowed by a political class that has vowed time and again to keep Kosovo Serbian.
That leaves option three, fudging. This is certainly the game Mr Milosevic has played so far: yesterday he sent a negotiating team to Pristina, the Kosovo capital, to hold talks with the Albanians. Only the day before, however, the police had forced villagers to bury their dead without forensic scientific examination of the bodies. The Albanians turned down the offer to talk, calling it a Serbian exercise in "play-acting".
During the Bosnian conflict, Mr Milosevic was one of the key instigators of the national sentiments that triggered the fighting; when the time was ripe, however, he softened his line and made himself an indispensable guarantor of peace.
He seems to want to play a similar game in Kosovo. But does he really have anything to offer the Albanians, and can the exasperated international community avoid falling into the same trap again?