This combination of instruments brings to mind the old Birmingham joke: "You can tell a Brummie by the shamrock in his turban" which I've always taken as a tribute to multiculturalism rather than racist, especially as my grandad, born of Irish parents in India, used to tell it!
If Irish bands can use banjos and bouzoukis I see no reason why a sitar wouldn't work.
BTW (more thread creep, sorry, Larry)the S.African flamenco guitarist I met in Greece (see the Kalymnos 2001 thread)said he was fascinated by the similarities between Celtic, Flamenco and Greek bouzouki playing, different techniques producing some similar effects. He was hoping to research these some time.
RtS