Good news from Iraq is not, in fact, "bad news for the Democrats." Bad news from Iraq is. George W. Bush, who ran on the Iraq War, is no longer a candidate for political office. The great danger for Democrats, who largely support a gradual end to the mission, is not that the country will improve and a stable withdrawal will appear in reach, but that the country will devolve and Republicans will make a case that we have to continue the mission to protect against chaos and devolution. The better Iraq looks, the easier it will be to move on from it, and the more comfortable Americans will be voting for a change in course. This stuff isn't rocket science.
The danger isn't "good news" from Iraq, but bad advice. If Petraeus argues for a continuation of the mission, that's "bad news" for those who support withdrawal. But Petraeus's argument actually requires bad news -- continuing regional instability requiring a large scale deployment of American troops --to make any sense. If there was good news -- were the surge really woerking, and reconciliation being achieved -- then it would be foolish not to begin preparing for the end of the American mission there.