|The problem with any discussion of Iran and their brand of fundamentalism has always been the same. No common ground on which to speak about the political system. You've got Arab and European scholars arguing that it is an Islamic democracy and American scholars and thinkers like Newt Gingrich arguing that it is a dictatorship. It is neither and both at the same time. The reality is that it is a transitional revolutionary system whose direction has yet to be determined.
Like most transitional systems, it could go either way, towards dictatorship or democracy. According to the historical record, however, most transitional systems (eg., French First and Second Republic, Weimar Germany, Latin American states) revert to dictatorship and do not become full fledged democracies. That however was the past, and intervening events might change that.
The question is: can there be such a thing as an Islamic democracy at the national level (and can it work)? If not, can these system become secular democracies? I'm not sure that they can. This is because Iran and Islamic states have a practical problem when it comes to secular democracy, most of their lawyers and jurists are mullahs, not secular lawyers like in the West. These states have secular technocrats and plenty of them, but they lack a strong secular legal caste to lead democratic movements. If you note, most modern secular democracies are dominated by politicians who are either technocrats or lawyers, and most popular revolutions are led by lawyers. That is why the mullahs led the revolution of 1979--they are lawyers and can write laws and constitutions.