I don't think he can control it. The place sounds like Chechnya, or certain areas of Afghanistan.
The Kurds in Northern Iraq are the same group that Turkey frequently invades Iraq to fight. Turkey has actually established a base in Northern Iraq -- to Saddam's advantage, I'm sure, but it's difficult to see why Saddam would allow such an infringement of sovereignty.
You're RIGHT ON the money here. Saddam gassed the Kurds before 1991 to quell their uprisings. The Norhtern no-fly zone keeps the kurds from being attacked by the Iraqi air force, and the southern no-fly protects the SHiites. On the ground, these rebels are able to hold their own, but if we give back air superiority, Saddam's remaining meager Air Force could pummel them daily.
Saddam /HAD/ control over vast majority of Iraq before he invaded Kuwait. Now he's temporarily in a "lock box" as Algore would say.