I understand your point....and perhaps I'm missing something in the reading but, the logic, to me at least, doesn't sound kosher.
Follow me if you will.
Aside from military targets, the only other of strategic value is Bagdhad. Since, according to the wargaming, we are already involved in the conflict, and given your observation of keeping the Israelis out of the conflict, why would we need to resort to a nuclear strike.
The above scenario does not hint as to why we would up the ante. Let's suppose the price of appeasement to Israel (like the Patriot Missle in '91), is the destruction of Bagdhad. A Rolling Thunder style event could reduce Bagdhad to shreds in a matter of hours. As a matter of course, I would think that a combination of BLU's, Cave Buster, and Dumb multi thousand pounders would do a more effective job on deep bunkers than an air blast. The above ground result is more or less the same.
Part of the problem I'm having with this is, why the wargame scenario assumes the worst case option, if in fact, part of their reason is to send a message. Wouldn't the credibility of the message be enhanced by, let's say, a conventional strike and the ensuing Dresden firestorm. A description of damage of that sort, is more conveniently poignant to portray.