Ahmadinejad makes nuclear threat on Israel. Oh yes he did…

Iran acquiring nuclear arms will not match Israel's deterrence but neutralize it. You cannot match a deterent especially not with such a small country. Iran has a large expanse of land that it can spread its nuclear capabiilties, Israel does not. Iran has subs and an airforce just like Israel does. MAD would not work with Israel on one side because of their small size. another downfall of the MAD deterent strategy with Iran is that it a theocracy that plays by the rules of a few madmen who interpret the word of 'Allah' as they see fit. It was said that an Islamic fatwa once issued in Iran abolished the use of nuclear weapons. This Fatwa was since reversed which paves the way for a nuclear capable Iran at the whim of a psychotic theocracy that puts homosexuals civilians to death for being gay.

WMDs already exist in Iran and it has not led to the Arab super-state you imagine

First, Iran is a major player in mideast politics. Hamas, Jihad (PA) and Hezbullah (Lebanon) are players in that game.
Second, Iran is not Arab but Persian and therefore there is more reluctance by Arabs to join them. Egypt, Syria and probably every other ARab country have biological and chemical weapons of some sort. A nuclear Iran would be a different story.

suppose it's a very exciting story (for those who care to suspend their sense of reality) but there has been precious little sign of anything remotely like it to date

Have you heard of Hezbullah in Lebanon? Al-Sadr's Army in Iraq? Kurdistan Workers’ Party in Turkey?

Just as Arabs (or in the case of Iran Persians) have to come to terms with the fact that Israel is not going to go anywhere either.

Are you serious? Hamas does not recognize Israel Look at the Hamas charter, neither does Lebanon, Syria, Iran, Iraq (maybe that will change soon), Saudi Arabia - Would you like me to continue?

A 2 state solution is the only solution - that is the first thing you said that I agree. BUT, the Palestinian state needs to be demilitarized.