Geneva vs. George W. Bush

Its been bugging me how Bush keeps saying the Iraqis at Abu Ghraib are "unlawful combatants" and don't qualify for protection by the Geneva convention. After reading an article in the New York Times I thought I would actually go look at the Geneva Convention. The "get out of jail" card for Bush comes from Article V of the GC which he claims allows him to exempt virtually all Iraqi prisons and those in Guantanamo from their GC protections. So here it is:

Article 5

Where, in the territory of a Party to the conflict, the latter is satisfied that an individual protected person is definitely suspected of or engaged in activities hostile to the security of the State, such individual person shall not be entitled to claim such rights and privileges under the present Convention as would, if exercised in the favour of such individual person, be prejudicial to the security of such State.

Where in occupied territory an individual protected person is detained as a spy or saboteur, or as a person under definite suspicion of activity hostile to the security of the Occupying Power, such person shall, in those cases where absolute military security so requires, be regarded as having forfeited rights of communication under the present Convention.

In each case, such persons shall nevertheless be treated with humanity, and in case of trial, shall not be deprived of the rights of fair and regular trial prescribed by the present Convention. They shall also be granted the full rights and privileges of a protected person under the present Convention at the earliest date consistent with the security of the State or Occupying Power, as the case may be.

I've emboldened the most relevant part, and based in it, if Iraq is considered "occupied territory" then it really does look as though Bush has found a loophole in the GC big enough to drive an entire invading army of gun toting, oil thirsty NeoCons through.

My question is, at what point did Iraq become occupied territory? I mean, if you're an invading army then at what point does the war end and occupation start, and why is the occupying force given some moral high ground to determine that resistance fighters are the ones that can now be termed spys and saboteurs. From the Iraqi insurgents perspective they are still fighting the war.

Looking back to WWII as an example - did Article V also give the Germans the right to capture and torture French resistance fighters as "insurgents"? Or how about if the native American Indians decided to start some campaign against the US government. Would they also be categorized as "unlawful combatants" and be wide open to torture or whatever the NeoCons cared to throw at them?

It seems to me that Article V allows any nation to waltz into some foreign country on whatever pretense, declare the country as "occupied territory" and the former inhabitants as "illegal combatants" and treat them however it so pleases if they don't agree to play by their rule. If so then I believe Article V is a rotten clause that should be removed from the Geneva convention.