OtherWorld Creations has, as it were, bitten the bullet: it’s the first D20 Modern scenario set in Iraq. Man, they gotta be hoping that when this sucker hits shelves it feels both relevant and not overly painful.
I guess stuff along these lines sells well enough, since Holistic Designs did well enough with Afghanistan D20 to warrant Somalia D20. Historically speaking, GDW made a mint on their Desert Shield Factbook, but lost most of it on their Gulf War Factbook. Loren Wiseman attributes the good sales on the former to being the only available book on the topic at the time. “The second was ‘just another Gulf War Book.’”
Bad taste? Enh, not inherently tasteless. Depends on how it’s done. I’d find an adventure in which the PCs bayonet hordes of Iraqis to be tasteless, but I’d find an adventure in which the PCs bayonet hordes of hobbits to be kind of tasteless too. More so the former, admittedly, since it’d more directly cater to real world unpleasantness.
But really, you just never know when you’re doing modern scenarios. A few years ago, Greg Stolze wrote an excellent adventure called “Fly to Heaven” in which a terrorist attempts to crash a commercial airline into the middle of Chicago. There’s some Stolze commentary on the whole question here.