What Reza Jr. had been talking about was not a mediaeval monorchy, but a constitutional monarchy, something along the lines of what Great Britain has (and some of the other European nations, no?). Essentially a figurehead monarchy.
But he's dropped that now, and that's a good thing IMH(and semi-ignorant)O. The people may want him back, but unless they themselves put him into a figurehead position he'll bring back the taint of American, um, installation that was one of the main weaknesses that those who wanted to topple Reza Shah exploited.