You make some excellent points.
I'm one of those who is reluctant to put too much blame onto Islam -- not beacuse Islam dosn't deserve a lot of blame, but only because it's not going away and I don't want to complain about any fact that can't be changed. People who want to complain about things that can't be changed are just people who are talking themselves into inaction an failure. (I don't mean to say that's what you're doing -- not at all.)
I'm cautiously optimistic about the future of Iraq. I think Germany and Japan are the closest models I can think of -- we had to keep troops there for 20-50 years to help them join the community of civilized nations. I don't see any reason that Iraq can't do the same, and I also don't think anyone should expect good things to happen in a shorter time frame. And if we can't succeed in a 20-50 year time frame, we may just have to try longer -- since failure isn't an option.
So that's a long-winded way of saying I agree with you 100%! We cannot allow Iraq to turn into any kind of unfree or undemocratic state.
On Islam, while I do NOT agree that it is a "religion of peace," all westerners should understand that Muslims are no more "devout" than 90% of the so-called "Christians" who do not practice their religion nor understand what is in the scripture. Now, from my perspective, this is good---it means that most Muslims either do not know that their religion calls for jihad (and this does men forcible conversion) or blood; or they just do not accept it (the way most Catholics do not, apparently, accept the Pope's rulings on birth control).
I've known, in passing, a number of Muslims and they just don't think their holy books call for "jihad." It is somewhat IRRELEVANT if they are wrong---it is more important to know if their view is the dominant one, and if Muslims, on the whole, are either mis-informed or simply disobedient to their own scripture. Either way, it then means they don't pose any threat to us---only the "obedient" and "obeservant" ones do, IF they read their own holy books the way I read them. (Again, this isn't always the case either: look at the differences between Unitarians and Southern Baptists.)