The major obstacle to peace in Iraq is still corruption, and the lack of things we take for granted in the West. The main problem is the absence of what is called "civil society." In short, this means that a majority of the people support clean and efficient government, and energetically back honest politicians, and denigrate dishonest ones.
In Iraq, the three major groups (Kurds, Shia Arabs and Sunni Arabs) never got along. Moreover, there are also hundred of tribes and clans which wield considerable power. The long time lack of honest courts, meant that many judicial matters (contract, marital, criminal and land disputes) were settled by clan or tribal elders. This is still the case. There is also the tradition of "winner take all." Anyone who achieves a position of power in the government is expected to take care of his clan or tribe, usually to the exclusion of anyone else. While many Iraqis understand the need for a civil society, the majority of officials still play by the traditional rules.
As a result, back in the United States, many politicians either don't bother, or don't want to believe, what is actually happening, and has happened, in Iraq. In a way, that makes sense. That's because what is going on in Iraq is so totally alien to the experience of American politicians. Moreover, many Americans take a purely partisan, party line, attitude towards Iraq. So logic and fact has nothing to do with their assessments of the situation. But if you understand where Iraq is coming from, and what it currently is, you have a better chance of seeing where it is, or should be, going.
Iraq is an ancient civilization that has been subjected to continuous foreign occupation (Mongol, Iranian, Turkish, British) for the last thousand years. What we know as Iraq was put together by the British, in the 1920s, from fragments of the recently dissolved Turkish Ottoman empire. The northern part of Iraq, containing mainly Kurds, was then considered part of Turkey itself, and not an imperial province like the rest of Iraq. But there was oil up there, and the British did not want the Turks to have that, in case there was an effort to revive the Ottoman empire. The British set up a constitutional monarchy, complete with parliament, and a royal family imported from Saudi Arabia (a noble clan that had been ousted by the Saud family early in the century). While democracy was alien to this part of the world, many Iraqis took to it. But there were serious problems with corruption, along with divided tribal, ethnic and religious loyalties. For example, the Kurds weren't Arab (they were Indo-European, and about 20 percent of the population), and 60 percent of Iraqis were Shia Moslems (a sect considered heretical by the conservative mainline Sunnis). The Sunni Arabs may have been a minority, but they dominated commerce, government, education and running things in general. Since the 16th century, the Sunni Turks had relied on the Baghdadi Sunni Arabs to help administer the area.
Britain had to re-occupy Iraq early in World War II, because the Sunni Arab dominated government (not the king) tried to ally Iraq with the Nazis. At the time, many Arabs admired Nazism. Many still do. The Brits again conquered country, using three divisions and taking three weeks to do it. The Brits found another bunch of Sunni Arab notables and told them they could run things if they stayed away from the Nazis. That lasted for about a decade, until the Sunni Arab politicians and generals decided that this democracy stuff wasn't working for them. The royal family was massacred and parliament purged of "disloyal" elements. The Sunni Arabs were back in absolute charge, via a series of dictators, until Saddam Hussein was deposed in 2003.
Saddam was a particularly brutal tyrant, killing hundreds of thousands of Iraqis (mostly Shia and Kurds), and terrorizing nearly everyone. After being run out of Kuwait in 1991, and barely surviving another Shia rebellion, he made peace with the Sunni Arab tribal leaders, and unleashed yet another terror campaign on the Shia Arabs. The Kurds were now independent, protected by British and American warplanes.
Now, this is the critical thing that many Americans don't understand, or even know. When Saddam was deposed in 2003, most (well, many) Sunni Arabs believed they would only be out of power temporarily. This sort of thing you can pick up on the Internet (OK, mostly on Arab language message boards, but it's out there). Saddam's followers (the Baath Party) and al Qaeda believed a few years of terror would subdue the Shia, scare away the Americans, and the Sunni Arabs would return to their natural state as the rulers of Iraq. U.S. troops quickly picked up on this Sunni mindset. Because Sunni Arabs were the best educated group, most of the local translators the troops used were Sunni Arabs, and even these guys took it for granted that, eventually, the Sunni Arabs would have to be in charge if the country were to function. The Sunni Arabs believed the Shia were a bunch of ignorant, excitable, inept (and so on) scum who could never run a government. Four years later, the Shia sort-of proved the Sunni Arabs wrong. By 2007, most Sunni Arabs had decided to make peace, not suicide bombs.
Which brings up another major issue in Iraq. Many Iraqis believe only a dictator can run the country, and force all the factions to behave. However, a majority of Iraqis recognize that dictatorships tend to be poor and repressive, while democracies are prosperous and much more pleasant. The problem is that the traditions of tribalism and corruption (everything, and everyone, has their price) do not mesh well with democracy. This doesn't mean democracy can't work under these conditions, many do. It does mean that it takes more effort, and the results are not neat and clean, as Americans expect their democracies to be.
The basic problem is that the United States is divided into two groups; those who have worked (or fought) in Iraq, or otherwise paid close attention to what's happening on the ground, and those who create their own picture of what's happening, one that fits other needs (personal, political, religious). No amount of wishing will change what is going on over there. The majority of the population hates the Sunni Arabs, who now have four years of terrorist attacks added to their list of sins. The Kurds, although beset by corruption and factionalism, have shown that you can still have peace, security and prosperity if everyone works together. The Arabs to the south see that, but have not been able to work together well enough to make it happen. Will the Arabs be able to overcome their factionalism and hatreds? THAT is the big question. What is lost in all the rhetoric about Iraq is that Iraq is the only real Arab democracy in the Middle East. Egypt is a one party state, a dictatorship masquerading as a dictatorship. Every other Arab state is either a dictatorship or a monarchy.
Iraqis know they are in a position to show the way, to an era of better government, and the freedoms and prosperity that flows from that. Iraqis know they have problems with religion, tribalism and corruption. Iraqis know what they are up against. Do you?