The episode was Sayid's backstory, but what I think is really interesting is that the Sayid's character was even in the series at all.
Lost debuted in September 2004, twenty months after the war in Iraq began, and eighteen months after President Bush declared the end of combat with "Mission Accomplished" speech. By the time Lost aired, Iraq had its first interim government in place, news of the Abu Gharib debauchery was one month old, and Saddam Hussein had been captured and would be executed by year's end.
Overall, I think the mood in the US at that time was that Iraq was an unfortunate and cathartic exercise, but one that was by and large behind us. Like the previous Gulf War, we had routed an inferior opponent, and were ready to make amends and put the whole affair behind us.
Sayid's presence in the show speaks to the optimism of that era. When he first reveals that he served in the Republican Guard, its a little shocking, but hey--we're all good with Iraq, right?