U-238 can be gradually enriched into plutonium in a special "breeder" reactor, absorbing particles emitting by a running reactor (actually, a tiny portion absorbs neutrons and then undergoes beta decay, emitting electrons and turning into plutonium - left running long enough this builds up and can be extracted from the remaining U-238 around it). But in itself it is not useful for bombs.
When the article says "weapons grade uranium", that means a sample of uranium that is around 90% U-235, seperated out of a much larger amount of uranium ore. The seperation process is quite difficult, and is the step the Iraqi's have not managed to solve on a large scale themselves. So U-238 getting to Iraq, while obviously not helpful, doesn't get them a bomb or solve the problem holding them up. Enough U-235 of high enough purity does. Or plutonium.
I hope that helps.