No Islam does not direct women to get circumcized. Actually, the Hadīth you have referred to has been translated literally, and thereby given rise to the question of female circumcision. If linguistic principles are given due considerations, the Arabic word Khitan used in the Hadīth and translated as ‘the circumcised part’ actually implies the copulative male and female organs.
In the Arabic language, there is a style called Mujānasah which means using similar words such that the second used word does not do the job of conveying its original meaning but rather being of the same genre as the previous one. We have examples of such usage in the Qur’ān also. For example a verse says:
The recompense of evil is similar evil. (42:40)
Here the word evil used second is merely for Mujānasah ie it does not do convey its original meaning; it is only of the same genre. Of course, the reward of evil is not a similar evil for the reward is a just act which the perpetrator of evil deserves; this act of justice cannot be called evil in the literal sense.
Answered by Shehzad Saleem