no truly democratic country would ever tolerate what the u.s. is trying to get the iraqis to tolerate. there's no country in the world that is responsive to the concerns of its people and would allow thousands of heavily arms foreigners to roam around the country when the foreigners are completely immune from any legal prosecution. they can, quite literally, get away with murder, with absolutely no legal consequences. the iraqi authorities aren't even permitted to arrest them or take them in for questioning.
can you imagine how the american public would react if we had albanian gunmen moving freely around the country, shooting and killing americans on a regular basis? and imagine if our government said that it didn't even have the power to arrest them. it's insane.
which is why the bush administration wants it both ways in iraq. on the one hand, they want to say that the iraq government is democratic. but, on the other hand, they don't want it to act like a real democracy would. the situation with private contractors is simply intolerable, no populace would ever accept it. the only place where you would expect to see a situation like that is a dictatorship, where the government doesn't feel responsive to the people and doesn't care if its citizens are dying.
which is why the iraqi government's action could be seen as a good sign. at least on this one issue, they are acting like an actual democratic government would and not some disconnected-from-iraqis american puppet.