Iraq never should have been a country.  Its borders are lines drawn in the sand by colonial powers after World War I.  The various peoples have no historic ties to bind them together in neighborly love nor do they have political, religious, or ideological ties.  Saddam Hussein was able to keep the country nominally unified through extreme brutality.

It should be partitioned into at least three smaller countries.  This would allow the Sunni, Shia, and Kurds to govern themselves as they see fit.  The only reason that the country was not partitioned after the ouster of Hussein was that the United States did not want to be accused of nation making by Britain, France, Russia, China, and others.  Make no mistake, the world powers will for the most part jump at any opportunity to criticize the U.S. but that is still the course of action that should have been taken and is possibly what should still happen.

The difficulty now is that the United States claims to have given sovereignty to Baghdad.  Of course any sovereignty Baghdad has is at the pleasure of the US as the US gave it to them and props them up through blood and treasure but, it is necessary to maintain the illusion of Iraqi sovereignty for diplomatic reasons.

A lot has been made of the division of oil wealth and how that is an obstacle to partition.  Call me old fashioned, but Iraq does not share its oil revenue with its neighbors currently, does it?  Does Japan share the revenue it gets from exporting electronics with Korea?  No, of course not.  Why would it?  I see no reason why Sunni Iraq should be expected to share revenue with Shia Iraq or vice versa.  To me this is a non-issue and those that are making a big deal of it are naïve, communal hippies, or attempting to stop progress.

Certainly partitioning Iraq would be of benefit to the average Iraqi but they can hardly be expected to take kindly to a foreign power chopping up their country.  If the US and Britain (etc.) were to completely pull out of Iraq before completely beating all remnant of the various militant groups, then it is very likely that Iraq would divide along sectarian lines anyway.  It may be inevitable; Iraq does not want to be a country.  In the absence of a strong armed dictator or foreign military powers, Iraq may just dissolve.