Mahmoud Ahmadinejad's first letter to President Bush was written more for the "Arab Street" than as an actual diplomatic opening for the American government. But now, it seems we do have a bona-fide request for talks from the Iranians.
In that request, they put everything on the table that we want on the table, and nothing that we don't. Of course, if a settlement would be reached it would require a compromise on both sides, but the Iranians aren't playing it that way while making the overture - which is smart given the "resolve" of the Bush Administration.
This stikes me as an important development. We've now arrived at the point where, should the Bush Administration refuse talks, there can be no further claim that resolving the nuclear issue is the primary concern of the United States. Instead, it is clear that they're merely angling for further escalation of tensions. There's simply no reason not to engage these talks.
So I think they'll have to embrace this. If they entrench themselves further it is a losing proposition for America, if not for their electoral chances.