It's a scary issue. When Iran was simply being an international dick I supported the notion of sovereignty and the right to be a dick, as well I figured that it would be hypocritical to allow Pakistan and India to have nuclear weapons, and Iraq to have chemical ones, but deny Iran.
Now, though, 2 possibilities haunt me. #1)Iran already has something, and are itching to use it in a situation which could be construed as self-defence or something complicated like that, and not result in world-wide support for massive retaliation. #2)Iran is bluffing, hoping people think #1 and thus they have time to actually make a weapon.
What Iran doesn't seem to realize is that a lot of the world is generally dumber than they were 20 or 30 years ago, and while average Joes may have understood basic concepts like MAD before, even basic game theory is lots on most now. The result is that the option #3) 'Make things go boom for me to watch on TV while I eat a microwave burrito.' is gaining widespread support.
At least I don't see other explanations for the actions of Iran's leaders. Heck even a lot of the leaders are quieter, and ALL the Islamic countries are uncomfortable with Mahmoud's rhetoric. Maybe Mahmoud really IS crazy, and really DOES want to bring about some prophesized apocalypse or something.
Right now I'm betting on #1. If I had to pick even longer odds I'd suggest that Iran has had Soviet scientists working on their nuclear program since the late 1970's, when the USSR shipped a thousand or so en masse as part of an agreement. But I'd suspect that Iran doesn't have their own weapons built YET, though they might have old or re-conditioned Soviet warheads they aquired.