Sorry, it will be a long answer.
Regrettably the problem is that whatever you do now it’ll be a “no win” situation anyway. What is going on at Caucasus is not good but it might be much worse. Actually, Russia has to make its choice between bad and worse. It is not only ordinary “separatism” we have at the Caucasus region of Russia – it is much more complicated phenomenon with religious, economic, social and ethnic overtones. I put a link to the “separatists’” internet site below for you. If you read their propaganda you’ll see that their purpose is NOT merely independence but establishment of the Islamic fundamentalist Caliphate which is supposed to encompass not only all Muslim republics of Caucasus but also adjacent Russian territories such as Krasnodarsky Krai, Astrakhan region,Tatarstan, Bashkortostan etc. Take a map to see what those guys are talking about.
Let’s imagine the scenario when Chechnya and other areas were granted independence. (We have a precedent of this kind when Chechnya was de facto independent between 1st and 2nd Chechen wars – 1996-1999). Immediately we’ll have the following problems to deal with:
1)Will Islamists be satisfied with this concession? As I said above independence is not the issue for them;
2)The economic contribution of these republics into the Russian pocket is next to nothing. The only regional commodity is Chechen oil (I don't mention forged vodka they brew in every household there for illegal sale somewhere else in Russia) which is of very low quality. Russia is paying huge donation to those regions now trying to appease them. This amount is allocated to pay to pensioners, doctors, teachers etc. What will be with them when there is no any flow of the Russian money into the region?
3)If independence is granted Russia must establish guarded border and visa regulation with those new countries. What shall we do with a few millions of ethnic Chechens, Dagestanes etc who live in Moscow, Petersburg and other Russian provinces? Shall we deport them back to Caucasus? What about those who are partly, say, Chechen and partly Russian? Shall we deport them as well? Even if they never lived in Chechnya?
4) All those Chechens etc. who live outside of Caucasus have many relatives in Chechnya, Dagestan etc. If independence is granted there will be a period of economic chaos and lawlessness which will force those people to go to Russia? What is the point with their independence then?
5)If independence is granted the area will turn into the haven for all kinds of Islamic fundamentalists, Islamists etc. who will flow to the region from all over the world. Do you think they will come to pray there? Have a guess.
6)The conclusion. In case of independence granted to Caucasus instead of a dormant conflict Russia will get a very "hot" conflict which could ignite a whole region and Central Asia in no time at all. It will be very helpful for Taliban in Afghanistan, Pakistan, extremists in Turkey and so on in alphabetic order. If Russia falls, believe me guys, it will start the domino effect everywhere.
So, what is the best way out?