The first and most obvious question that arises from this is: was Germany's "encirclement" inevitable no matter which German government or its policies were in place due to geo-political, commercial, and strategic interests? Was there any plausible way that these interests would be changed?
Was there any way Germany could have reasonably courted a great power alliance within the political constraints of the time (e.g. Germany could never give up Alsace-Lorraine to France for example due to the many overwhelming security, economic, political, and prestige reasons for not doing so)? Was there anything Germany could do to make her alliance more valuable to the other powers?
Essentially my question is, how could Germany have reversed its diplomatic fortunes and isolation in the run up to the First World War?
This is, arguably, worth its own thread!

There's a very large historiography of the outbreak of the First World War.
My personal take on these questions - was it possible for Germany to have a more favorable diplomatic position than it was actually in in 1914 - is "maybe yes, but also no".
First, the "no".
Most historians would agree that the alliances and agreements the British foreign office of the early twentieth century pursued were done in order to neutralize military threats to Britain's colonial possessions. While the USA, Japan, Russia, and France all possessed the ability to militarily threaten British colonies, Germany did not and could not develop such a power. In addition, there was a powerful xenophobic anti-German bloc at the British Foreign Office, especially from ~1902 on, that made meaningful cooperation very unlikely. Pretty much everything else about the Anglo-German relationship - the kaiser, Edward VII, the
Daily Telegraph, the Haldane mission, German negotiating tactics, even the High Seas Fleet - is a red herring. And while many of the individual steps on the British path to entering the Great War were extremely avoidable or mutable, all of them were
British actions taken irrespective of anything the Germans could realistically have done.
Some French governments were willing to indulge in limited cooperation with Germany over colonial questions but not end their security rivalry in Europe. Whether this was due to the size and power of the German military, the issue of Alsace-Lorraine, France's wounded national pride over the defeat of 1870, or some other reason differs depending on the historian; however, what does not change is the general conviction that Germany could not meaningfully alter the relationship with France. That change would have had to come within France, with the ascension of politicians who could engage with the Germans meaningfully on the basis of the status quo.
German relations with Russia actually might have been possible to...
manage effectively. "Patch up" might be too strong a term. Russo-French financial ties were significant in a way that relatively illiquid Germany could not easily supplant. Russia and Germany fought some tariff battles, especially over the "Grain Invasion", that increased hard feelings and decreased opportunities for cooperation. And large segments of the German and Russian governments simply did not like each other. However, financial considerations condition, but do not determine, diplomatic ties, and there were plenty of Russian and German statesmen who liked the other country just fine. The balance of competing long-term effects on Russian policy favored an alliance with France, but it's possible to see that changing...but hard to see it changing too much based on
German policy decisions. The Germans tried about as hard as they could in 1905 to secure an alliance with the tsar during his meeting with Wilhelm at Björkö, but the Russian cabinet convinced him to disavow the signed treaty after consultation. Nikolai and his ministers would have needed an additional push from somewhere else.
That's a lot of "no". However, the "yes" matters, too.
While British alliances were primarily based on neutralizing security threats, what the alliances actually did was more like a duct-tape solution. Japan and Russia still had strategic interests that were not about to go away, and serious friction broke out between the British and both parties before August 1914. In particular, the Russian invasion of Iran in 1911 caused major problems for their relationship with the British, while the temporary Russian window of insecurity that made a British alliance valuable in 1907 had disappeared by 1914. It's entirely possible to imagine the Russians and British abandoning their close relationship within a few years had fighting not broken out. The (second) rise of Joseph Caillaux in France also points to a possibility for the Germans to have cooled off an antagonistic relationship.
I don't know if that means that Germany's
alliance would have been valuable to other powers. But it does point to a
possible - far from
certain - way out for the Germans. Unfortunately, as Clark himself argues in
The Sleepwalkers, the multiplicity of crises developing in the Entente's internal relationships - the return of Caillaux, the impending civil war in Ireland, the confrontation over Iran, etc. - made war
more likely, not less. The fragility of the alliances made it more important for statesmen to try to defend them. Absent a serious crisis in the summer of 1914, maybe they would have collapsed anyway, but that didn't happen.