Our ambassador to Iraq, Zalmay Khalilzad, also had the right goals (even though he is one of the original neo-cons, he is a rare person from this administration who I thought did a stand up job in Iraq). Khalilzad wanted to get an oil sharing deal among the different sects, reform the Iraqi constitution and get rid of de-Baathification which was leading to resentment among Sunnis because they were shut out of government jobs. It's crucial that we undo the damage that Paul Bremer did by de-Baathifying in the first place and driving Sunnis to the waiting arms of the insurgency.
Unfortunately, this is where Ayatollah Sistani just snapped Iraq in two (probably three). After that snake Ahmed Chalabi talked to him, he has put the word out that he will not back the de-Baathification program (this NYT article explains it best). That means Sunnis will not get the stable jobs that would give them an incentive to join the Iraqi government. That means they will feel alienated and fight back against a government that completely excludes them. The insurgency will grow. The civil war which has already begun will now spiral out of control.
The Sunnis no longer have any incentive to make a deal. The only place where they think they might make gains is on the battlefield (I believe they are also sorely mistaken in that belief). So, it's on. Iraq no longer exists.
By the way, in case you missed it -- yes, Grand Ayatollah Ali al-Sistani makes the most important decisions in Iraq. The real power in Iraq runs through Sistani. He decided who would be elected to the Iraqi government in the first place when he selected the religious Shiite bloc that won the 2005 elections. George Bush handed Iraq over to a Grand Ayatollah. Brilliant work. Genius. Is it possible to be more incompetent?