The US Senate is the wrong place for this, the wrong people to be “demanding it” and sends the wrong political signal to the people in Iraq, at this time - you have a government you should not trust.
That said, “federalism” would not be a bad idea for Iraq, but the Senators idea feeds into the sectarian divide and does not help it.
First, the idea of more local autonomy (schools, local police, local business regs, etc) should be at the provincial level (like our states), not merely three large regions and it should include an “upper” body in the legislature with equal representation for each province.
That would have provided some provinces where either Sunni or Shia are overwhelming majorities and some where Sunni and Shia are more mixed; but the local “autonomy” and upper house federal representation of those provincial units will be less dominated by purely sectarian issues.
I wonder if anyone tried to make these arguments to the Iraqi leaders, when they were considering their constitution. That was the true time for them. At this point who can blame the Iraqi people or leaders for calling the Senators interlopers and meddlers.
The Kurds already have what amounts to statehood and the natural separation of Shiite and Sunnis are already occurring without violence because there is no civil war.
Federalism and provincial authority is already included in the Iraqi Constititution. I guess the senators have not read it.