Josh Putnam has a nice post up pointing out that you can ignore any claims you hear that the Iowa Caucuses will be jettisoned if Ron Paul or some other unlikely nominee winds up winning. As Josh says, the job of Iowa is to winnow the field, not to pick a winner. He also goes through some of the technical reasons why it's difficult for the parties in practice to shift away from Iowa.
I think the shorter version is simple: if you're going to have a sequential system, some state has to go first, and there's no particular reason to suppose Iowa is worse than any other state would be. Yes, it's not a demographic match for the nation, but no state is. You can come up with plenty of other dimensions on which it's not descriptively representative of the US as a whole, too -- but again, that's true for any state.
I'm also mostly not impressed, on the Republican side, by claims that social conservatives are especially important in Iowa. They are important, no doubt -- but is that really atypical for the GOP? It sure doesn't seem like it to me.
It also seems to me that the GOP nomination process is basically working pretty well this cycle. To the extent that stability helps that happen, keeping the early schedule in place is probably the best way to go. But as Josh says, we're probably stuck with Iowa (and New Hampshire) whether we like it or not.