In the Iranian case I think it is fair to take that step for several reasons. First, there can be no doubt that the movement supporting Mousavi is widespread across the country and cuts across class lines as Juan Cole made clear a couple of days ago, and a report by another scholar who specializes in rural Iran has also criticized the much referred to urban-rural split. Second, Mousavi and his allies have clearly risen to the occasion and shown himself ready to go head to toe against the Supreme Leader Khamenei and Ahmadinejad by making the complete annulment of the election his main demand, and today has made mourning of people killed part of the plan, as was key to protests against the Shah in 1979. Gary Sick and Juan Cole both doubted this would happen. As Cole reasonably put it in his post of 13 June:
My own guess is that you have to get a leadership born after the revolution, who does not remember it and its sanguinary aftermath, before you get people willing to push back hard against the rightwingers.
At this point for Mousavi and his allies to back down may still be theoretically possible, but it might even bring about the end of the protests after significant government suppression. Yet, in the long-term the effect would be counter-productive by reinforcing the illegitimacy of the entire Islamic Republican order in the eyes of the millions of people protesting in favor of Mousavi. Under that scenario, which I think is increasingly unlikely, the Green Revolution would go down in history as a failed revolution that continues to resonate in the way that the revolutions of 1848 did in Europe, and more recently 1956 in Hungary. 1968 in Czechoslovakia and the 1980-81 Solidarity period in Poland.
As I suggested a couple of days ago, I think the Polish analogy is especially useful. While Martial Law would never have been conceivable without the threat of a Soviet invasion, it was nonetheless an internal affair as anything that happens in Iran will be. More importantly, Iran's economy is not in the kind of shape that a reinforced Islamic regime could buy off the majority of the people with consumer goods. This was a serious problem for the Jaruzelski, especially since the economic grievances that had given birth to Solidarity had been precipitated by Gierek's efforts to buy off Polish workers during the 70s -- I can't tell you how many times I heard my Polish university student friends lament that in 1985-86 that there was a generation growing up that had not tasted a banana. By contrast, Hungary and Czechoslovakia, and more recently China all had the economic where-with-all to keep people materially satisfied. Iran's economic problems have to be dealt with, and keeping Ahmadinejad in power will only make them worse. The money he has to buy off people now may well not be there in 5 years, even if oil prices do go up as the world economy picks up.