The theme of this week seems to be Iraq, so I'm going to propose that it no longer exist. A bit simplistic, but I think it just might work.
The time has come to reevaluate Iraq's colonial-era boundaries, given the seemingly intractable divisions between the Shiite, Sunni, and Kurdish groups. While the boundaries between the groups are diffuse, they are becoming more defined with every passing day; Shiite death squads push Sunni families out of mixed neighborhoods while Shiites flee Sunni bombers. Furthermore, a new political agreement forced by Kurdish PMs gave Arab families incentives to leave the ethnically mixed city of Kirkuk, originally Kurdish but forcefully Arabized under Saddam. A unified Kurdish bloc is taking shape in the north of the country, while Sunnis are increasingly concentrated in a handful of neighborhoods in Baghdad and the rest of the "Sunni triangle." Shiites, meanwhile, dominate the south of the country.
The only real problem is oil. The oilfields are concentrated around Kirkuk and the southern Shiite territory, leaving Sunnis dependent on a unified Iraq to receive a fair share of the oil proceeds. This suggests a loose federal structure as the way forward, with a central government in charge of distributing oil money on a per-capita basis and little else. Each region already virtually has its own army, and making the boundaries official will allow American troops to take a less prominent role, easing the transition as families relocate (under ideal circumstances this would be voluntary, but little about Iraq is or has ever been ideal).
It is time to recognize that Iraq is not a country capable of governing its disparate population, and has never been. It is an artificial British post-World War I creation which has run its course. Let's acknowledge reality, and try to set Iraq on a viable future course before our troops are inevitably brought home.