NATO are in no position to fight Russia. Most European armies are small and incapable of offensive operations. What NATO have in place in Eastern Europe is purely a defensive force. It would take weeks - if not months - to put a force together that could go in and and push the Russians out of the Ukraine. Thus the military option really isn't a viable one at this juncture.
The only way out of this is diplomacy; and that only works if the US and the major European players want to end this situation via diplomatic means. I personally don't think they want that. There is no sign that the western powers want to press the reset button, and deal with Russia on equal terms. For what ever reason, they have allowed this situation to come to pass - be it by design, or just pure stupidity.
IMHO, one of the biggest geo-political and intelligence fk ups of the last century was the Wests belief that Russia would crumble in-on itself after the Soviet Union broke up, and then still treating them like a cold war adversary, once they realised they were not going to implode.
With hindsight, it would have been better to have offered them NATO membership back in the early 90's. That said, without Russia, there would be no need for NATO.