Okay, first of all: All nuclear reactors produce plutonium. Period. Thus any state that has nuclear reactors can be considered a nuclear proliferation threat.
That said, light water reactors are not the ideal choice for nuclear proliferation. For that you want a heavy water reactor such as what Pakistan, India and South Korea used to jump-start their nuclear weapons programs (there is speculation that South Korea actually could build several bombs within a few months if they desired to do so, but does not do so because of U.S. pressure), or a graphite-moderated reactor such as what North Korea used to jump-start thier nuclear program.
Light water reactors require enriched uranium for their operation, and there's only a few sources of enriched uranium (it is NOT easy to produce). Those sources -- France, United States, Russia -- control (or try to control, in the case of Russia) shipments of fuel rods tightly, requiring compliance with rather draconian monitoring requirements in order to keep your reactor running.
The problem is that while these three countries retain ownership of the fuel rods, they actually have no facilities for dealing with returned fuel rods, so the fuel rods are never returned. They are still stuck overseas such as e.g. in South Korea's cooling ponds. South Korea probably has enough plutonium in its cooling ponds to build several dozen bombs. It is quite conceivable that Saddam could have been looking at South Korea and conceived of a two-part nuclear weapons program, one where he ran civilian reactors for a decade and accumulated lots of plutonium-laced fuel rods at the same time that he built a secret fuel rod reprocessing facility, then a second one where he said "Screw you" to the French, reprocessed the rods, built the bombs, and the fact that he couldn't build more than the ten or so bombs obtainable from those fuel rods would not have mattered to him it'd still be enough bombs for his purposes.
In other words, while light water reactors are not an ideal method for nuclear proliferation, they're an ideal method for HIDING nuclear proliferation, if you want the bomb but do not want to raise alarm bells. Develop uranium enrichment capability like the Brazilians are doing, and you have closed the cycle -- a civilian facility is now a bomb-making facility. So the fact that the French were building a light water reactor for Iraq does not mean that Saddam had no nuke plans... it just means that said nuke plans would have taken years to come to fruition.
- Badtux the Nuclear Penguin
