It's not a democracy, though it tries to pass itself off as one, and the Ayatollahs don't speak for the common folk. A subtle distinction, but an important one.
Here's a simple rule to help keep it straight: regime officials speak for the regime, and common people speak for the commoners of their particular ehtnic group.
Oh, and be careful when speaking of the "Iranian people" as a homogenous unit. They all pretty much hate the government, but have little else in common. they're almost as ethnically variegated as in Iraq. It's another grandfaloon.
It's a common occurrence that these third world dysfunctional nation states are all really empires of multiple ethnicities who don't like each other much, and are kept in line only by the harsh government of the dominant (lately Tikriti, at one time Turkish) tribe.
There are two kinds of states that can function well. One is an ethnically homogenous one, such as Japan. The other is a melting pot of immigrants from various cultures, who have adopted by choice a unifying set of principles, and thereby transcended their petty rivalries. That's the United States. A civilization of shared values, not shared folkways.
Iraq has neither of these. That's why I think it should probably be split up. Although a very loose form of federalism might sort of work there, they'll never be more of a real nation than, say, Canada. [link|http://freethoughts.org/archives/000077.html|Likewise Iran.]