In that sense, the comparison of a nuclear-armed Iraq to the sides in the Cold War is singularly inappropriate. The Russians were anything but irrational. (If anything, they were more rational than we were.)
If we want a real point of comparison, we need to look at the Cuban Missile Crisis, during which Castro was apparently vehemently in favor of launching a strike on the U.S., even though it would have meant the obliteration of his island. Castro would have done it, too, because his devotion to the "symbolic" act was more important than the long-term consequences.
In that sense, one can draw enough parallels between Castro and Saddam to realize that Saddam may well be willing to use a nuke.
It is absolutely correct that nuclear weapons (and, to a much lesser extent, chemical and biological ones) are a deterrent, even to the US. Those who favor global interventionism see this as an absolutely terrible thing. But it depends on your underlying assumptions. If you view the US as a "benevolent hegemon", then all other nations must be stopped from developing nuclear weapons. On the other hand, if you harbor the ideals of the Founders (that the US "should not go abroad looking for monsters to slay"), then this is a non-issue.
Especially under the Clinton administration, the interventionism of the US went into hyper-drive....Haiti, Bosnia, etc...culminating in the Kosovo war. The American elites, who have taken it upon themselves to intervene in every aspect of American life, are now moving outward to apply their brilliance to foreign policy (I call this "interventionism as the final stage of liberalism").
Seen from this angle, any potential defense against unwanted control from Washington (be it guns in the hands of Texan cultists or nuclear weapons in the hands of various unsavory dictators) is seen as an affront to the power of the Washington elite...an effront which must be removed.
I believe that this is the motive for the missle-defense system as well. At first, as a naive patriotic american who believes in the ideals of the founders, I thought that the missle defense system was a good idea. I believed that its rationale was to protect the US from some rogue dictator deciding to launch missles at America. With more thought, the real agenda dawned: the real reason why Washington wants missle defense is so that they (the DC elites) can continue to engage in global interventionism without having to worry about nuclear deterrence. Thus removing said this "affront" from the decision tree of the elites.