One of the most deeply educational books we've read is Mantle of the Prophet: Religion and Politics in Iran by Roy Mottahedeh (Oneworld, reprinted 2000) which explores the texture of life in Iran as well as theology and history.
The best all-round book on the current crisis remains Andreas Malm and Shora Esmailian's Iran on the Brink (Pluto, 2007), reviewed in PN2485. Roger Howard's Iran in Crisis? Nuclear Ambitions and the American Response (Zed, 2004) and Iran Oil: The New Middle East Challenge to America (IB Tauris, 2006) are readable and useful. Ali Ansari's Confronting Iran (Hurst & Co, 2006) is an interesting historical survey but elitist and skates over the Shah's repression.