There's an interesting opinion piece in the Asia Times Online from Kaveh L. Afrasiabi that helps explain some of the internal political conflicts going on inside Iran. He argues that Iran has two choices, either go back to the international isolation it experienced in the 1980's or go back to a more measured stance as it did in the 1990's.
Iran is fairly well equipped to deal with the rather toothless sanctions posed by the US that date back to the hostage crisis of 1979. Short of an oil embargo, Iran can financially withstand any lesser sanctions such as travel bans, a freeze on assets of leaders and the like.
On the other hand, the Iranian economy will suffer grievously should foreign investors stay away, foreign contracts be canceled or put in indefinite limbo, and the bills for foreign imports skyrocket, translating into higher unemployment and economic stagnation. That would come on top of a war economy where more and more of the government's budget is swallowed up by defense spending. At a minimum, it will slow Iran's economic growth, about which Ahmadinejad boasted recently.
Thus, looking ahead, a year or so from now, with Iran under international isolation, the picture that emerges is rather bleak – an Iran turned into a Middle Eastern version of isolated North Korea. That is hardly what Iran's foreign-policy establishment aimed to achieve during the past two decades.
There appears to be a growing rift between the foreign policy insiders and the more revolutionary elements.
This might explain why Iran rebutted the recent statement by a military leader, regarding Iran's intention to attack Israel in case of an assault by the US, saying it was not "valid". The pendulum had swung too far in the direction of bellicose rhetoric supplanting diplomacy, and as Dr Hassan Rowhani, the former chief nuclear negotiator, has candidly stated, Iran welcomes dialogue and diplomacy.
Of course, this may all be misinformation, too. The Iranian President's most inflammatory rhetoric has been, if anything, growing worse recently. While there may very well be elements that wish to ratchet the situation down a bit, it remains to be seen which group comes out on top in the debate. Right now the face Iran is presenting is one of a bellicose nation looking to pick a fight.