StopStart
RAF Website states:
RAF squadrons which were required to operate under constant threat of attack and had demonstrated gallantry and spirit under fire during the campaign over Iraq and Kuwait or on the ground in the same territories have been awarded the Battle Honour ‘IRAQ 2003’ with the right to emblazon the honour on their Standards. Other squadrons which participated in the air and ground campaigns, albeit at a slightly lower level of danger, have been awarded the honour ‘IRAQ 2003’ without the right to emblazon the honour on their Standards.
I believe you are correct in both parts - Sqn action and participation is key but relies on the evidence laid out in the Sqn's F540 (operational record book). Hence the importance of getting someone reasonably able to write to compile it (especially on ops). Cr*p in, Cr*p out.