Iraq needed a federal republic after the occupation. Each region with real representation in the legislature would go a long way toward their various groups feeling enfranchised. Of course not breaking it in the first place would have been good as well.
Well, at least initially that was the plan. But there is a very serious problem. Most of the oil wells are located in the Sunni and Kurd areas, and not in the Shiite inhabited regions. Shiites constitutes somewhere around 60% of the Iraqi population, and they want the oil wealth to go to the central government. And obviously the Sunnis and Kurds are opposed to this.