In late January, the European Union removed an Iranian opposition group called the MEK, the Mujahedeen-e-Khalq, from its list of terrorist organizations. The action followed a years-long lobbying effort by the Paris-based group, which opposes the theocratic government in Tehran.

It also raised hopes among the MEK's supporters and the regime-change-in-Iran crowd in Washington that the United States would also stop designating the group as a foreign terrorist organization. The group was responsible for assassinating several U.S. officials in Iran in the 1970s.

The group has had an interesting history to say the least. It was a major force opposed to the rule of Iran's late shah, and actually supported the takeover of the US Embassy in Tehran nearly 30 years ago now. But its leaders quickly parted ways with Iran's new religious government and, during the 1980s, got aid and comfort in Iraq from dictator Saddam Hussein. Iran and Iraq fought a bloody eight-year war from 1980-88, and if my soundings during a two-week trip to Tehran in December are any indication, many Iranians have never forgiven the group for hooking up with their arch-enemy in Baghdad.

Several thousand MEK fighters and their families remain at Camp Ashraf, Iraq. Following Saddam's overthrow, some senior officials in the Rumsfeld Pentagon toyed with the idea of using the MEK as a weapon against Tehran, which led to some vicious inter-agency battles with the State Department and CIA. While there have been reports that some MEK fighters were "sheep-dipped," ie. signed pledges never to engage in terrorist acts against the U.S. and its allies, and then sent into Iran, no solid evidence of this has emerged.

As it turns out, in the waning days of the Bush administration, then-Secretary of State Condoleezza Rice reviewed the question of whether to keep the MEK on the U.S. terrorism list. Ultimately, she decided to keep the policy in place, effectively handing the issue over to the Obama administration (which is conducting a wide-ranging review of Iran policy).

What we found interesting, however, is that Rice's advisers were split on the issue, according to our sources. Rice received a split decision memo from different bureaus at State, some arguing that the MEK should come off the list, others strenuously arguing it should remain on.

And that indicates the war over the MEK may not be over.

The setting Wednesday was State's expansive Dean Acheson auditorium. The event was Secretary of State Hillary Clinton's first Town Hall-style meeting with State Department employees since she took office last month.

The crowd was full - many employees stood along the auditorium walls for the 1-hour, 11-minute event, and the applause was warm for Clinton as she strode into the room. Senior officials were seated in the front row, among them assistant secretaries of state Dan Fried (Europe), Chris Hill (East Asia, but soon to be off to Baghdad as ambassador, we hear) and Richard Boucher (South Asia, a portfolio being gobbled up by special envoy Richard Holbrooke).

The topics ranged from democracy promotion abroad to aid to Afghanistan, but dwelt mostly--as one would expect from such a session--on issues of money and resources. Throughout it all, Clinton dealt deftly with the mostly gentle questions, displaying a quick wit and ability to address the issue at hand without making firm promises that's been honed over the years at the White House and on the campaign trail as a senatorial and presidential candidate.

Only one questioner, intern Chris Dilworth from Indiana University, asked a pithy, yes-or-no question of the type journalists favor. "Will you ban private military contracts?"

The Q was a timely one, since Iraq recently announced that it will not renew the contract of private security contractor Blackwater, and State is looking around for alternatives to protect U.S. diplomats. Clinton split the difference, saying that the State Department should "diminish our reliance on private security contractors," but quickly adding, "Whether we can go all the way to banning, under current circumstances, seems unlikely."

On Afghan aid, she revealed that senior department officials are conducting a review to determine how much money and from which accounts is going into Afghanistan. That seems to say volumes about the state of the U.S. effort in the country.

Throughout, Clinton was reassuring, positive, encouraging.

Equal benefits for same-sex partners? Clinton told foreign service Ralan Hill this is "an issue of real concern to me" and said a review of current policies is under way. "It's on a fast time-line."

More efforts to advance the rights of the women and the disabled? "You can count on my commitment to you on that," she told Stephanie Ortoleva, from State's Bureau of Democracy, Human Rights and Labor.

Greater use by State of Facebook, MySpace and other social networking sites? "Yes, absolutely," the SecState said, while allowing that there are legitimate security concerns. (This question came in via the Internet from Ed Gagliardi of the U.S. Embassy in Mexico City, who relayed how a colleague had determined a Mexican visa applicant ineligible after scoping out the applicant's Facebook page.

Anjalina Sen, the U.S. vice consul in Guangzhou, China, asked a question many of us have been wondering about: how will high-powered special envoys like Holbrooke and former senator George Mitchell, the Middle East peace broker, coordinate their work with the State Department bureaucracy?

Clinton gave an "It Takes a Village" answer: "That's a really good question," she said. "I want your ideas about how we can integrate all of our work better."

Talk about from the frying pan into the fire. Chris Hill, the highly-regarded US diplomat who has spent the past four years in the diplomatic equivalent of the dentist's chair, trying to get North Korea to give up its nuclear weapons, is getting the nod to be the next U.S. ambassador to Iraq. And the second prize would be?

While there was no official announcement Monday, State Department officials said Hill seems to be a clinch for the Baghdad job, replacing Ryan Crocker, who departs on February 12.

Hill labored throughout former President George W. Bush's second term to secure a deal with North Korea to abandon its nuclear arms, making numerous trips to that loveliest of foreign capitals, Pyong'yang. He rescued the agreement several times when it appeared to be on the verge of breaking down--both because of North Korean obtuseness and fierce opposition by then-Vice President "Deadeye" Dick Cheney over negotiating with the Norks at all.

But the effort faltered at the end of Bush's term, as North Korea balked at proposals for verifying its declaration of its nuclear weapons holdings, and North Korean leader Kim Jong-il fell seriously ill with a reported stroke.

Hill remains popular in many quarters, although the likely assignment to Baghdad is in some ways an odd one. He has extensive experience in the Balkans and in East Asia (he served as ambassador to Macedonia and South Korea), but little in the Middle East.

Some see the hand of Richard Holbrooke, the Obama administration's new envoy to Afghanistan and Pakistan, in all of this. Holbrooke, who helped broker the Dayton accords that ended the Bosnia wars, is a long-time Hill mentor and pal.

Hill won out (if that's the right phrase) over other potential contenders for the job, including retired Marine Gen. Anthony Zinni; former U.S. ambassador to the Philippines and Egypt Frank Ricciardone; and former ambassador to Lebanon and current #2 in State's Mideast shop Jeff Feltman.