No, I don't think the threat of WMD is overblown. Look at some of the reports that list what was found in Iraq. Also, it has been reported that other countries are continually seeking WMD and seeking technical personnel to help them.
The threat of terrorists using a nuclear device within this country to level a city is, in my opinion, overblown, as the logistics needed to make it happen would be, based on what I've read, staggering. But the threat of other kinds of attack, including a "dirty bomb" or biological terrorism are not overblown in my opinion. I agree that the threat of Iran's nuclear program are also a bit overblown.
I don't think the threat of WMD's is overblown, but I do think it can be used to manipulate people through fear. Referencing #2, I don't think people realize the threat of one nuclear device detonated over the United States. Used in this fashion, and EMP bomb could wreak havoc on this nation.
I think that the threat of a country like Iran having WMD is overblown. I cannot know this for sure, of course, but it seems likely that a nuclear Iran would not be very likely to attack anyone. It would know that it would get destroyed if it actually used its WMD and so it would not be very likely to do so.