Good points all, now my two cents...
I get extremely frustrated with the the US not engaging Iran's moderates ca 2000. Even before 9/11, it looked like Iran was willing to deal (of course, that's based on the news reports I heard, not on hard evidence or intel behind the scenes)
Engaging Iran makes strategic sense. We have many common enemies in the Middle East, and if their moderates were able to show results, assets unfrozen, much more access to investment and development, they might not have so much invested in being a rogue actor in the region.
Hizballah's a major money drain for the Iranians, as is Hamas. Moderates knew that and were willing to use them as a bargaining chip for a better economic deal for themselves and maybe a nice propaganda victory in getting Hamas serious consideration in the Palestinian peace talks. Would that have really hurt us or Israel that much?
Never forget the role Persian pride plays in the games Iran plays as well. They want to be a regional power and after the Iran-Iraq War, have no illusions about the friendliness of the Sunni states across the Persian Gulf. The geo strategic victory of taking the Iranians off the list of threats to tanker traffic through the Strait of Hormuz and be of aid to developing the energy assets of Central Asia is enough to warrant some consideration of what they offer.
We've done them numerous favors (unintentionally) taking out Saddam, allowing a Shi'a-dominated state to develop in its place, leash Mujahedeen-e-Khalq as well as bitch-slapping the Taliban.
About the only thing we haven't done on the Iranian political wish list is rebuke Israel. I'm NOT advocating doing so, just that the US has already done a lot to make Iran safer without benefit to us. Why not a diplomatic initiative that actually yields us some positives as well?
So with that POD, let's say, we manage to get a working agreement together with the Iranian government ca. 2000. Could you imagine how much better a position we could be in if we had good land routes to Afghanistan and Iranian support, no need to rely on the Pakistanis replying to 9/11? Moreover, the Talibani leadership would be a lot leerier of giving the US and Iran an excuse to
remove them from power. OBL & Co would be a lot more unwelcome. Also, the Iranians would be able to develop their oil and gas reserves, build some refineries at long last to ease their gasoline shortage among other things. Hamas would have to deal, if Iran quits giving them a blank check. Oh and imagine if you will, how feisty Saddam would be when confronted with US-allied Iranians eager to repay him for the casualties of the Iran-Iraq War in 2002? Enough boots on the ground would be the least of our problems.
That's all for now, though I'm sure more will occur to me later.