One city at a time raise hell and get concessions from the superior Americans forces. The Iraqis know the US does not want to go house to house, so they can force the US to the negotiating table one city at a time. Sunnis in their cities, Shiites in their cities each trying to get the upper hand over the other. Meanwhile the US avoids major engagements but must suffer low intensity warfare against our troops.
But the real losers are the terrorists, who will slowly be eliminated from Iraq one city at a time.
Might work out well for us and Iraq over the long haul, if the Iraqis can be trusted to eliminate the terrorists once they are given control over a city. Fallujah will be the test for the Sunnis, Sadar City (Bagdad) for the Shiites, which, my guess is the next test.