Let me see... how to understand Iran right now. One thing, at least, is that many in the west are making the mistake of assuming large protests in Tehran by a cultural elite that is not at all representative of Iran as a whole means a 'popular' revolution is on the boil in Iran - there may and very likely is a majority of people and possibly a large majority at that who do not like at all what's happening and it would be a huge mistake by the west to act aggressively without understanding the 'true' dynamics at play. Obama especially is in a very tough spot [of his own creation]: if momentum continues to build he must act or else be seen as the shallow actor that I tend to believe he is; but if he acts and no popular upheaval emerges [which is still very likely] then he will in effect be at war with the Iranian regime - meaning, there'll be no talking his way out of the nuclear standoff, the die will be cast. On the other hand, he could get lucky - a 'moderating' revolution could overwhelm the powers that be and Obama will be seen to have played a part in it - I think this is an extremely, extremely unlikely thing to happen but, like I said, he could get lucky - although be careful what you wish for: 'revolutions' have a tendency to produce results that 'surprise', and often in none too pleasant a way.
Also it seems to me people are not addressing the logic of the situation. Iran is controlled by the clerics and the Republican Guard; it is true there is dissension and disagreement amongst the clerics, but it is important to understand that that dissension does not necessarily represent radically different policy ideas nor does it infect the higher echelons of clerical power - also, any clergy, especially a Muslim one, depends on the unquestioning faith of its subordinates and therefore, having already declared the election results blessed by Allah how can they now come out and say 'oops, sorry'?; the Republican Guard, on the other hand, is of one mind essentially and there's a good chance they hold the final say in what happens here. Consequently, the two most reasonable outcomes are: a popular revolution does take hold but degenerates quickly into chaos and civil war with the conservatives emerging victorious and more determined than ever to make life miserable for the rest of us, namely Israel and America; a China '89 scenario is about to be unleashed which should, depending possibly on just how 'real' A---'s support is, produce results similar to the first option but with somewhat less carnage. I suppose as well there's a third option: the protests ebb away and things return to status quo ante - remember, there's a reasonable possibility that the results in fact do adequately represent the will of the people - although, with the amount of discontent revealed, things can never really be the same: it's not in the nature of repressive regimes to moderate or relent when their power is threatened.
And there is a wild card here: it's not quite clear why Khamenei agreed to review the results in the first place - a tactical error? fear? or is it possible he's actually trying to get out from under the boot of the Guard? Logic suggests it's most likely a combination of first two - but that is an unknowable at the moment.
I suppose another wild card or unknowable here is that you can't say with any certainty that, if it comes to it, Iran's hardliners will be able to crack down on its discontents with the same cold blooded efficiency with which China cracked down on theirs.
