I guess I'm a v1.0 purist, in terms of the historical background. I see it as an alternative history that diverged from our own around '89-'91, specifically with the fall of the Berlin Wall.
Desert Storm could have happened in that alternate reality but I'm not so sure it would have, if the Soviet Union had stuck around. Despite the various wars in the Middle East, both the Soviets and the West had vested interests in maintaining stability in the region. Leading up to the '73 Yom Kippur War, both the U.S. and the Soviet Union tried fairly hard to prevent a shooting war between the Arab bloc (led by Egypt) and Israel, despite the commonly held (and erroneous) perception that Egypt was egged on by the Soviets and Israel by the U.S.
I'll admit that I don't know as much about the Iran-Iraq war. I know that the U.S. backed both sides (albeit covertly, for the Iranians) but I don't really know if/how the Soviets were involved.
I think that Saddam very well could have invaded Kuwait in the alternative '91, but I think that the combined political and economic pressure the West and the Communist Bloc would have forced Saddam to back down and pull out of Iraq before military action was taken on the part of the Coalition. That's the way I see it. Saddam invaded but pulled out under pressure from both the West and the Soviet Bloc, before Desert Storm.
To get back to Chico's question, I'm not sure I could say what Saddam would have done. If Desert Storm had taken place, his armed forces would have been significanly weaker than they would have if it had not. Perhaps he would be more cautious with how he used his remaining forces.
If Desert Storm had not occured (my preference), I think Saddam would have waited to see how things played out in other theatres before deciding which horse to back. A badly divided Iran would have been a very tempting target. On the other hand, Kuwait would have been easy pickings. As a blatant opportunist, I'm sure Saddam would have pounced on one or the other (or both). Both the Eastern and Western Blocs would have been seriously preoccupied with their own affairs elsewhere and he may have believed that they would be unable to respond to his own regional power grabs.
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