These rumors were frequently manifested in order to create more fear of the regime and keep the people in line.
I don't think the average American can even begin to understand how difficult it is for the average Iraqi to take advantage of what our invasion and overthrow of Saddam makes possible for them. It will take decades for them to overcome the absolute fear they lived under for generations.
Living in the 7th century is much more debilitating than any of us can imagine. Heck, I have culture shock when I go to visit my wife's kinfolk in rural Alabama.
We probably spent way too little time and effort early on working with them to help them adjust to the idea of life without Saddam. Much of Iraq was probably very much like New Orleans at the time of Katrina. The population had become so dependent on being told what to do when, where to do it and how to do it that without that guidance they were able to little more than sit on the roofs of their flooded substandard housing and wait for help.
I think had I been calling the shots I would have started with one very small part of Iraq and made it what a 21st century area should be like. Things like electricity 24-hours-a-day, running water, sewer treatment, paved roads, etc. Of course that would include the provision of sufficient security that people in the area could enjoy the benefits of post 7th century life. Then I would have slowly expanded the area as conditions permitted.