Aasia Bibi isn't at home. Children play at the blue gate of her modest home in Itanwali, a sleepy Punjabi village. Bibi, the woman at the heart of Pakistan's blasphemy furore – which triggered the murder of Punjab governor Salmaan Taseer last week – is in jail, desperately praying that she won't be executed. Her neighbours are hoping she will be.

"Why hasn't she been killed yet?" said Maafia Bibi , a 20-year-old woman standing at the gate of the house next door. Her eyes glitter behind a scarf that covered her face. "You journalists keep coming here asking questions but the issue is resolved. Why has she not been hanged?"

Maafia was one of a group of about four women who accused Bibi, also known as Aasia Noreen, who is Christian, of insulting the prophet Muhammad during a row in a field 18 months ago. But she will not specify what Bibi actually said, because to repeat the words would itself be blasphemy. And so Bibi was sentenced to hang on mere hearsay – a Kafkaesque twist that seems to bother few in Itanwali, a village 30 miles outside Lahore.

A few streets away Maulvi Muhammad Saalim is preparing for Friday prayers. The 31-year-old mullah, a curly-bearded man with darting, kohl-rimmed eyes and woolly waistcoat, played a central role in marshalling the blasphemy charge. When a court sentenced Bibi to death last November – the first woman in Pakistan's history – he "wept with joy", he says. "We had been worried the court would award a lesser sentence. So the entire village celebrated."

The young cleric excuses himself: it is time for Friday prayers. Padding across the marble floor in his socks, he plugs in a crackly speaker, and issues a droning call that rings out across the village. A madrasa student shoos a stray goat out of the mosque courtyard. Villagers wrapped in wool blankets shuffle in.

Judging by the sermon it is not Christianity that was preoccupying Saalim this Friday. For 30 minutes he rails against the evils of drinking, gambling, kite flying, pigeon-racing, cards and, oddly enough, insurance. "All of these are the work of the devil," he says, before launching into a fresh recitation.

Saalim was born in 1979, just as General Zia ul-Haq, the dictator many blame for Pakistan's radicalising wave, was hitting his stride. Saalim reflects the influences of his generation. He hails from Bahawalnagar, close to Zia's home. He studied for eight years in Pakistan's "madrasa belt", close to the city of Multan. Now he is imparting his learning to another 150 students in his own madrasa, which follows the strict Deobandi tradition. "It is the way of God," he says.

Optimism is difficult in Pakistan, a country prone to misfortune that judders from one crisis to another. After the events of recent days, however, it seems that what matters is not whether the glass is half-full or half-empty. What matters is who poured the water.

A row over a glass of water is at the root of the case against the 46-year-old Christian mother of five. And it is indirectly the reason why a rogue policeman killed Taseer outside a trendy Islamabad café last Tuesday, plunging the country into a fresh torment.

The argument started on a hot summer's day in June 2009 as Aasia Bibi picked falsa berries – a purple fruit used to make squash – with her Muslim neighbours. She brought them water to drink; they refused to touch her glass because she was a Christian. A vicious row ensued, although what was exactly said remains a matter of contention.

Bibi's accusers say she flung vile insults at Islam and the prophet Muhammad. "She got very annoyed," recalls Maafia. "But it was normal. We could not drink from that glass. She is Christian, we are Muslim, and there is a vast difference between the two. We are a superior religion."

Bibi's supporters say she used no religious slander, and was resisting pressure to convert to Islam. "She said those women used to badger her to convert to Islam. And one day she just got fed up with it," says Shehrbano Taseer, 21-year-old daughter of the slain governor, who has visited Bibi in jail.

After Bibi's conviction last November, the case seized the attention of Taseer, the outspoken governor of Punjab. Outraging conservatives, he visited Bibi in jail along with his wife, Aamna, and his daughter. He posed for photos, offered warm support, and promised a presidential pardon. He spoke on high authority – President Asif Ali Zardari told Taseer he was "completely behind him", a reliable source said.

The bold intercession had been prompted by Taseer's daughter. During a family holiday at the Punjab government's winter residence in Murree, a hill resort above Islamabad, Shehrbano had alerted her father to Bibi's plight through her Twitter feed. "He took the phone, read the tweets, and sat and thought about it for several hours. Then he said we should do something," she recalls.

He was playing with fire. Religious leaders were outraged at Taseer's description of the blasphemy statute as a "black law". Protesters torched the governor's effigy outside his sweeping residence in central Lahore. A radical cleric in Peshawar's oldest mosque offered a 500,000 rupee (£3,800) reward to anyone who killed Bibi. Then last Tuesday Taseer's guard, 26-year-old Mumtaz Qadri, turned his weapon on his boss and pumped him with bullets.

The killing has rocked Pakistan more than any event since the assassination of Benazir Bhutto in 2007. And the unseemly public reaction has laid bare an ugly seam of Pakistani society, suggesting a country in the grip of a rash Islamic fervour.

Last Wednesday 500 clerics from the mainstream Barelvi sect, who had previously criticised the Taliban, forbade their followers from offering condolences to Taseer's family. Another religious group has planned a rally in Karachi tomorrow to protest against law reform. Posters for the rally singled out Sherry Rehman, a brave ruling party MP who shared Taseer's outspoken views, for criticism. One preacher in the city has already dubbed her Wajib ul Qatil by one preacher – "deserving of death". Fears that she could follow Taseer hardly seem overstated.

For all that, there is less religion behind the blasphemy furore than meets the eye. Critics say the law is, often as not, used as a tool of coercion against vulnerable minorities, or to settle petty disputes, or both. Typically, disputes culminate in one man claiming that his enemy burned pages from the Qur'an – even though it is a mystery why anyone would choose to do so in a religion-obsessed country such as Pakistan. Many victims of the blasphemy law, in fact, are Muslim.

When Christians are targeted, the motivation is often an ancient subcontinental prejudice . Christians have traditionally worked as cleaners and sweepers; many Muslims still consider them "unclean". "This whole business about religion is just a decoy, a smokescreen," said Ali Dayan Hasan of Human Rights Watch. "It's often a case of simple caste prejudice."

In Itanwali, a rich agricultural village surrounded by swaying fields of sugar cane, wheat and vegetables, nourished by a British-era canal, villagers have traditionally voted for the Pakistan People's Party, of which governor Taseer was a staunch member. But there is little sympathy in the wake of his death.

"We feel sad," says village elder Chaudhry Muhammad Tufail, after Friday prayers. He betrays a faint smile; the crowd gathered behind in the mosque courtyard snigger. With 18 acres of land and a job as lumbardar – the man who controls land deeds and access to water – Tufail is one the most powerful men in Itanwali. He played a key role in driving the blasphemy charges against Aasia Bibi.

Her supporters say the two had had a bitter prior dispute. "There was an argument over water, and she said that his buffalo were eating the fodder for her goats," says Shehzad Kamran, a Christian preacher who has visited her in jail.

Tufail denies there had been any problem. "The law has taken its course," he says firmly.

The problem is exacerbated by militancy. At Itanwali's brick kiln, labourers toil under a towering chimney spewing black smoke. Several say that Lashkar e-Taiba – the militant group that carried out the 2008 Mumbai attacks – and Sipah e-Sahaba, a vicious sectarian militant outfit, were active in the area. Christian aid workers, speaking anonymously, say that attacks on Christians – including the Gojra attack that killed eight people in 2009 – have been orchestrated by such groups.

In death Taseer has been deified as the fountainhead of liberal Pakistan. The reality was more complex. Sharp, brash and undiplomatic, Taseer was a political bruiser who devoted much of his energies as governor to frustrating his old political enemies, the Sharif family, in Lahore. Although an instinctive liberal, he had also taken a job under the military ruler, Pervez Musharraf. And in person he could be profane and brusque as well as charming.

But he was unafraid to take a principled stand against the froth-mouthed mullahs and their violent supporters – a rare quality in Pakistani politics. "He was a larger than life figure, with all the faults and qualities of any human being," said writer Ahmed Rashid. "But during his last stint in politics he took up human-rights issues in a way he had never done before. I think he matured a lot."

Discrimination is nothing new to Pakistan's Christian minority; vicious attacks in small Punjabi towns have heightened the sense of isolation. But since the death of Taseer – their most prominent defender –they feel more imperilled than ever. At a Lahore safe house, a family described how the blasphemy law had ruined their lives. Yusuf Masih and his wife Suria have been on bail since last July, when a local mullah had them charged with blasphemy. Their crime was to have put scrap plastic sheeting on the roof of their outdoor toilet, to keep out the rain. Unknown to them, the sheet contained a religious verse. "We had no idea," says Masih, a stubble-chinned cook who cannot read or write.

As they await trail they live on the run, flitting between the homes of relatives and a safehouse provided by a Christian charity. They desperately hope they will be acquitted. But like almost all blasphemy victims, there is no question of returning home. When they ventured back two weeks ago to collect a few belongings, they found the place ransacked. "They took everything," says Masih.

Aasia Bibi is unlikely to face the hangman's noose. No blasphemy convict has ever been hanged in Pakistan. In fact many blasphemy prosecutions are overturned by the appeal courts, which are to some degree immune to the pressures of the mob that afflict local benches. Usually the judges simply find that there's no evidence to support the case. But that doesn't mean there's no danger.

Up to 40 people have been killed by vigilantes, including policemen, according to human-rights workers. Not only the accused are at risk. In 1997 a High Court judge, Arif Iqbal Bhatti, was assassinated after acquitting three people in a high-profile case. Then last week Taseer became the first politician to pay the price.

Among liberals, outrage at the manner of his death has been matched only by despondency at the public reaction. The megaphone stridency of Pakistan's right wing has met a pathetic political response. Terrified of being on the "wrong" side of the blasphemy debate, opposition parties bleated words of soft condemnation after Taseer's death on Tuesday. His own colleagues were hardly better. On 30 December the government announced it would not repeal the blasphemy law; days later interior minister Rehman Malik announced that he would personally shoot anyone found guilty of blasphemy.

Liberals were disgusted at the sight of lawyers showering Taseer's killer with rose petals as he was bundled out of court. "They stink of hatred," tweeted commentator Nadeem Farooq Paracha. But the voices of protest seem to be in the minority, as right-wing mullahs and the media cast a long and dark shadow. It is hard to know what qualifies as hate speech in Pakistan any more.

Bibi's chances of freedom are remote. Legal experts say her appeal may not come to court for years. "These cases often go on for a decade," says Ali Dayan Hasan of Human Rights Watch. At any rate, she might be safer in jail.

At the Itanwali mosque, Maulvi Saalim predicts that Bibi would be killed if she were freed. "A passionate Muslim would reach her and kill her," he says.

Would he do the job himself? "There are good Muslims everywhere," he responds with a shrug. "Anything can happen."