Well, honestly I dont know which settlement Pakistan would accept. But one thing sure any solution will have to satisfy India, Pakistan, and majority of Kashmiris. And this will not be possible to without India and Pakistan leaving their prior positions.
There can be many such formulas like :-
- Demiliterization of Kashmir, giving them a semi-autonomous status, making LOC irrelevent so that Kashmiris can travel easily.
- making a trade of Areas.
The solution will have to be aimed at calming the anger among Kashmiris in IOK by giving them political and administrative freedom to such an extent that is accepted by the other two parties.