The Iraqi armed forces have been steadily declining since their defeat in the 1991 Gulf war. Back then, the Iraqis had some 900,000 troops and 13,000 armored vehicles (including 5,000 tanks). Their air force had 700 warplanes. The damage done by the coalition combat forces, and eleven years of a UN embargo keeping out legal arms imports have reduced the Iraqi armed forces to some 420,000 troops, 6,000 armored vehicles (only about 2,000 tanks) and 300 warplanes. But the numbers don't tell the entire story. Unable to legally import spare parts or new ammunition, a lot of equipment has become unusable. Limiting the use of weapons for training has left the troops less capable of performing well in combat. Iraq still has a lot of ammunition that's over eleven years old. For the artillery, in particular, this is disastrous. Artillery ammunition does not age gracefully. Most of the Iraqi ammo was Russian made, or manufactured in Iraqi plants using Russian techniques. We know what happens to overage Russian ammunition, because the Russians hate to throw away or use up old ammo for training and have years of experience with old stuff. They often sell this stuff at a discount to poor nations. There's a lot of data on how that old ammo performs. Basically, a lot of it (20-50 percent, depending on age) won't work reliably. In Afghanistan, where Russians had their own troops using ammo that was often over 20 years old, the dud rate was some 30 percent. Worse yet, using older propellant produces inaccurate fire. So even if the shell doesn't go off, it will end up far from the intended target anyway. The shelf life of artillery ammo varies from 5-20 years, depending on the component (shell, fuze or propellant.) There's a lot of artillery ammo out there that is long since passed it's expiration date. And a lot of this stuff is owned by the Iraqis.
Even with fewer troops, the Iraqis have not been able to muster enough politically reliable men to staff the Republican Guard. This organization, which has always had the best weapons and equipment available, had 150,000 troops in 1990. Since then, the official strength has been reduced to 100,000, but Saddam's secret police have only been able to find 70,000 men politically reliable for this force. This is another indicator of how much more unpopular Saddam has become inside Iraq over the last decade. To deal with this problem, Saddam has formed the "Special Republican Guard" of some 15,000 troops (plus another 10,000 politically reliable reservists who can be recalled in an emergency.) The regular army (some 350,000 troops) has become very suspect politically. Shias and Kurds are not allowed to be officers, and there aren't enough politically reliable Sunni Arabs (who make up about 20 percent of the population) to fill all the officer positions. With so many of the officer slots are filled on the basis of political reliability, rather than military skill, you have a force designed more to prevent mutiny than to fight a war.
The most reliable armed force isnt military, but the numerous security agencies (Special Security Service, General Intelligence Directorate, Unit 999, Military Security Service, Border Guards and Military Intelligence). These contain 100,000 men (and a few women) who spend most of their time checking on political reliability. Their reports have become increasingly more pessimistic. This is known from the growing number of military officers and security personnel who have been defecting over the past few years. In response to this, many young men with a government job have been "encouraged" to join "Saddam's Fedayeen," which is basically an irregular police force that makes sure people turn out for demonstrations and provide local muscle for use against any citizens whose enthusiasm for Saddam appears to be weakening.
Iraq has been smuggling in as much military equipment as it can, but this approach cannot bring in much large stuff. Some smuggling operations have been detected and interrupted. From this we know what the Iraqis are trying to get. Most of the smuggled material has been spare parts for anti-aircraft weapons and missiles. Some spares for armored vehicles and warplanes have also gotten into Iraq. But from satellite recon it is obvious that the smuggling has not allowed the Iraqis to use their shrinking equipment inventory to train their troops as much as they did before 1990.
Iraq's armed forces can muster perhaps twenty percent of the combat power it had in 1990. They can still threaten Kuwait (which they still do, continuing to claim Kuwait is theirs) and attack their own people (which they also still do, especially Shias in the south). Would new tactics help? Like digging in and fighting inside an urban area? It's doubtful. Iraqi troops fled Kuwait City in 1991 rather then do the street fighting thing. It's unlikely Iraqi troops have developed any new enthusiasm for urban warfare.