Democracy begins and ends with self determination, therefore "allowing" each precinct, township, and province to chart their own future is paramount in producing a democratic government. The American effort to force a top-down system of government on the Iraqi people is undemocratic and destined to failure.
The real test of democracy is can it provide every person and group their rights and self determination. From the beginning a unified Iraq was a foolish and unrealistic view that could be seen only from a colonialist perspective, and to try to foist democracy at the point of a corrupt gun was even more foolish.
But even now, we could "allow" each of the Iraqi regions their own government and then step out of the way. Giving each Iraqi self determination will allow them to pave their own way, face their own demons, live within the international community, and develop their own democracy-which is truly the definition of democracy.
Offending the neighbors should not be a real issue, those who have held the Kurds under subjugation and from self determination have no moral standing in holding back their independence, and independent shiite and sunni Iraqi states would have to live within internationally acceptable conduct and limits or face condemnation and sanctions.
In any case, Iraq is what it is, and each people should be able to have their own homeland and their own government. The partitioning of Iraq will happen, what we can do is get on the side of reality and help reduce the pain and bloodshed during the separation.