Well, terrorists would be a concern with smuggled nuclear weaponry, but we are talking about Iraq here as far as I can tell. After a month of sabre rattling, at the end of August the Bush Administration, despite earlier claims to the contrary, admitted that they had no evidence whatsoever connecting the Saddam to Al Queada. Not suprising since the two are actually opposed to each other, Saddam had already put a price on bin Laden's head in the early 90s.
As JellyBaby said, the no fly zones were implemented by the US/UK after the Gulf War and was not part of the UN agreement that Iraq signed. Iraq never agreed to the no fly zones.
The idea that Iraq is a nuclear threat while we "let him be" is stupid. Isreal has over 400 nuclear weapons, and the US will gladly bring in more if Iraq pulls that rabbit out of its hat. The surest way for Iraq's destruction (and the world's support for it) would be for them to launch a nuclear attack. Right now, the world is behind Iraq, the US and UK are seen as loners, and to make matters worse, public support and congressional support isnt strong in the two countries that are pushing for this. Iraq has the upper hand now in the international arena, and as long as they keep to themselves and allow inspectors that will remain.