I would say they are worse about it than most of their neighbors.

I think some of them know it very well, but never forget how truly effective propaganda can be, say it long enough and you believe it. Large elements of their leadership really would like to exterminate Israel. I'm less worried about the current regime getting it then the current regime getting tossed out by even worse hardliners. Nukes are inherently defensive weapons, but only as long as everyone involved would rather live then kill their enemies or firmly believes that they will actually die if they try it. I prefer not to gamble much where fundamentalists who lean toward believing suicide is a good way to get into paradise go.

It really revolves more around power projection, assuming everyone involved remains very rational (which is a big assumption in this case) then you have Iran in a far more dominant position because they are effectively immune to invasion so long as they don't go too far. Having nukes means having a lot of muscle, especially when people take as a given you're aggressive. You don't invade nuclear powers, and they always know they have a decent bargaining chip if things go bad if they invade, interfere, etc. If Iran arms, others will too, other Arab nations will not feel safe having Israel and Iran on either side of them with nukes, insofar as they find both places seriously threatening to begin with. I don't think the world will come to an end if Iran get's the bomb, but I would prefer they didn't, and I really have few qualms with bombing them to stop it. I don't think we're there yet though.