Let us also consider the internal equation of Pakistan, Nawaz shariff was a different man before the quadri/IK protests he had a say in foreign policy especially when it comes to india..... But now he is not that strong and when a PM is weak, we know who calls the shots in Pak...... That can also be considered as a reason why GOI thought of stopping the talks. If you know nothing is going to be gained out of talks, why not cancel it and show the nation that the new govt is strong and doesnt hesitate in taking strong decision.....
I see it the other way around! If we know he is internally in a weak position, especially towards his forces or the public, we need to help him gain strength again and not to fall into the old habits, by acting strong in a militaric way. So a political reach out from our side, towards him or even the Pakistani government in general, might have gained us more. It's also important who talks! That we don't improve things when Pak forces are talking to Indian forces in flag meetings should be not surprising, so canceling them might be a show off, but isn't a big loss either. But not talking on a government to government level to find solutions, is the actual limiting factor.
Why didn't the PM invited his counterparts openly to talks to resolve the problem? No matter what the outcome would be, it would had shown that Indian government acknowledges Pak government, which puts them then under pressure to reach out too, even if their forces might not like it.
Of course it's a complex issue, for the reason you mentioned, but as long as we play in the cards of those who want conflicts, by relatiation in the same manner, pointing fingers or simply not talking anymore, we won't get anywhere.
One more thing came up in the NDTV show was, though the IA/BSF response in loc is similar in UPA/NDA regime, The local commanders were more confident as the signal from centre was clear, unlike UPA which used to give mixed signals.....
That's "imo" is based on one of the good things of the new government, the moral is higher, because the forces has actual persons showing that they are backing them. MMS was PR was a disaster, while Modi is playing that well be it with the media or directly in his interactions with the forces. While the PMs (former and current) actually doesn't play a big role, so have not much difference as a moral booster. So even if the government actually is saying the same to the forces under UPA or NDA, it's a difference in how they say it, which is important in this case!