Jeff has been taking some flack for his recent posts, so I think that I should to say a few things on the matter. The argument here is between those who think that the development of an Iranian bomb is absolutely and in all ways unacceptable and those who believe that, ideally undesirable as it is, it is a containable threat. Obviously, I don't accept the former view, and subscribe to the latter. Perhaps even to use the word "threat" concedes something that shouldn't be conceded, since it is actually quite implausible that Iran will be threatening the United States with any nuclear weapons that it might eventually acquire.
However, the question need not be one of Iran's economic collapse vs. its acquiring nuclear weapons. Still, it is fair to note that there are conceivably rational reasons for the Iranians to pursue alternative sources of energy given their stagnating refining capacity and gradually declining reserves. It would also be fair to mention that under international law and the ratified nonproliferation treaty about which our government professes to care so much (when it isn't subverting it with the Singh government in India), Iran can legally develop the technology for nuclear energy. It would also be worth mentioning that most nations around the world do not assume that Iran is preparing to build a nuclear weapons program, and this assumption is one shared by a very few governments. Americans seem to take such a claim for granted largely because the government has told us that it is so, and we have frankly been down that road a few times too often in the last decade for me to endorse such claims without some skepticism.
Jeff is, of course, quite right that the Iranians pursued the bomb before the Revolution (with, it might be added, Israeli assistance) and would pursue it in the future were the Ayatollah and his minions dead in a ditch somewhere. Iran has strategic interests and a desire for a nuclear deterrent no less compelling than its neighbours to the east. We do not merely humour and tolerate these other proliferators, who are in much more gross violation of the supposedly sacred NPT that we invoke today, but we offer them favourable deals on weapons and nuclear technology. Given Iran's longstanding rivalry with Pakistan and historic resentments towards Russia, I think we make a real mistake if we fixate on an Iranian nuke as a response simply to Israel's arsenal. Of course it is a play for regional power, but it is also an attempt to adjust the balance of power in South Asia, which has turned against Iran significantly in the last few years (the fall of the Taliban notwithstanding).
In the end, the problem is simply one of practicality: can anything realistically be done to prevent Iran from developing the nuclear technology that it probably will, like Pakistan and India before it, use to develop nuclear arms? The answer is: no, not really. The attempt would mean general war in the Persian Gulf, ultimately to our detriment and severe harm to the global economy. I do not even delve into the morality of unprovoked military strikes against Iran. It simply makes no sense from the perspective of our long-term interests, taking those interests as defined by internationalists.