Except the bomb would then be the size of small car, and undeployable except by low-level C-130, overland, or by ship - ie would never get anywhere near a strategically useful target.
That would be okay for terrorists, smaller the better but trucks just as good in a pinch.
Strategic is relative, for terrorists a city is a strategic target.
That said would the Irainans be the first to deploy if they had the capability? Only if they could get in a good knock out punch that would stop Israel from responding on a large scale with their nukes. You might find one ore two responses might be regarded as okay.
The question is what would the west do? If Iran did launch and take out major Israeli citys what would the response be. Well if it was all finished in short order, the thought is that we are going to wipe out Iranian citys after the fact, you would be mistaken. The worst case retaliation might be to take out military infrastructure.
Now considering that is obvious then most of the important Iranian forces would most likely not be some where obvious.
The end result, major Israeli city's gone, their defence capability reduced, and Iran with a severe bloody nose, and the hero's of the Islamic world.