Imagine Taste of Chicago was a major national force.
Iowa had an estimated 1.8 million registered voters in 2004.

Only 354,000 participated in the caucuses (239,000 Democrats, 115,000 Republicans). 19% voter turnout and this was a record. Every participant was almost 5 registered Iowans.

As asim points out, this is not a standard vote process, which is part of why participation was fractional (which makes it more significant or not, depending on how you value the private vote).

Barak Obama, the front runner, got 38% of the Democrats. That's 90,820 votes.

To put this in perspective, in the most recent Chicago Mayoral election, the second place candidate got 91,878 votes. Daley won with 324,519 votes. There were more total voters in that city election - a 33% turnout, one of the worst in Chicago history.

If you break it down by party, Daley got more votes than either group. Hell, the City Clerk almost got more votes than the total participants in the Democratic caucuses.

Now, imagine that less than one week into an election year, the City of Chicago had a major determining role in what candidates would be around for your primary. Actually, given the total number of voters, imagine only part of the 50 wards in Chicago took part - 30 making the decision for Democrats and 15 for Republicans.

Imagine almost the entire presidential field spending several months and millions of dollars in Chicago, for an quasi-voting event which barely represents the city's population let alone the nation. Imagine Chicago moved its event forward to keep its first place status. Maybe that would seem like some serious bullshit, and one might think Chicago was hyping and exploiting a damaged system.

The one candidate who stopped campaigning long enough to block a major vote about illegal wiretaps had his fate decided by around .04 percent of every voting age person in America. No matter what his message, our system is such that it never seriously counted, not even with .04.

I can understand why some people think voting is for suckers.

(Note: my headline is inaccurate - more people attend Taste of Chicago than are registered to vote in Iowa).

Edited to add: People have convinced me a primary which resembles a final election would be unwieldy and unconstitutional as it would further solidify the two party domination which is not supposed to be part of elections. Iowa's outsized influence is just one of many reasons a bipartisan only governance is a bad thing.

The current nomination process isn't even the result of a single plan, but an ad-hoc, piecemeal system driven by conflicting agendas over many years, resulting in entropy which works against democracy. It's hard to remove the influence of big money and big media when the underlying structure is a patchwork of tradition and tacit assumptions.

The ideal would be to jettison the two party system, but in the meantime increasing the level of minimal coherence is required for it to function. In 2007 the parties barely bothered to control the rush by states to leverage clout via early primaries in imitation of Iowa and New Hampshire. This can't continue.

A few set primary dates which rotate every 4 years would be a good start.