Ironically, Panetta's comments decrease the risk of military action. The threat of a strike is more effective a weapon then a strike itself. Very few actors in the world want Iran to have a nuclear weapon and at the same time very few want to see a military attack on Iran (including Israel, which has limited capabilities for carrying out such a strike) - it could unleash a contagion of violence across an already violence-prone region. At the very least it would lead to a spike in energy prices, which instantly makes billions poorer and fuels unrest in its own right.I'll add a few additional points, having had a day to think about it. First, for a sense of what a nuclear Iran would look like, check out Pakistan.
But tolerating a nuclear Iran is also a very unpleasant possibility. Iranian politics are complex, but there are substantial radical constituencies that - even if they would not immediately use a nuclear weapon for eschatological reasons - would use it as cover for subversive activities throughout the region. Neighboring Pakistan has become an aggressive user of terrorism as a strategy and gets away with it because of its nuclear arsenal. Iran, sitting astride the energy rich Persian Gulf would be well-placed to make even more international havoc.
International sanctions are starting to bite, hard. But just as the sanctions bite, nations around the world have incentives to start easing them. The threat of an Israeli strike makes everyone nervous, and creates incentives to keep the pressure on Iran - which is difficult but beats the alternative.
The other point to consider is what the end game looks like. There are substantial constituencies that insist on regime change in Iran (internally, by overthrowing the mullahs - no one sensible is talking about invading.) But with the sanctions biting hard, the regime might very well be ready to come to the table. But if official US policy is still seen as pushing for regime change, then there is no incentive to come to the table and every incentive for the Iranian leaders to press on for nukes (the ultimate guarantor of regime survival.) Would Western powers be open to such a bargain - would the US come to terms with the Islamic Revolution if they dumped their nuclear program in a manner that is satisfactory to the US? The example of Libya, where the US ultimately sided with those who overthrew the regime, despite Qadhaffi's re-alignment and ending his WMD program is hardly encouraging - at least from the perspective of the leaders in Tehran.