You're right. I wasn't aware that the verse I quoted was taken out of context. I apologize.

But doesn't the phrase, "If they keep not aloof from you..." imply that they cannot live amongst you? I can accept that "nor offer you peace nor hold their hands" would imply that they attack you, but not staying aloof doesn't seem to be the same thing.

And what of: "They long that ye should disbelieve even as they disbelieve, that ye may be upon a level (with them). So choose not friends from them till they forsake their homes in the way of Allah; if they turn back (to enmity) then take them and kill them wherever ye find them, and choose no friend nor helper from among them" (4:89)

Does this not imply that you cannot be friendly to non-believers, and that you should kill them if they turn away from Allah?