I'll try and give my understanding on the issues of Nuclear Energy vs Nuclear Proliferation as best I can declaring myself an 'enthusiastic amateur' at best.
Firstly, my understandingis that you can't get highly enriched uranium from spent fuel and it is very very difficult to make weapons grade plutonium from the spent fuel from a nuclear reactor. Other than hydrogen bombs, uranium is the prefered fuel for nuclear bombs.
Therfore, I'm assuming you're talking about producing HEU with the original intent for use in a nuclear weapon rather than using nuclear waste for nuclear weapons.
The Iran situation is tense, and will need to be carefully monitored. I do not, however, think that this situation should stop a whole industry.
Thorium reactors would remove this conversation altogether.