I'm unclear as to what we are debating at this point. I thought it was about setup and motivation of Stark's change of heart presented pretty early in the movie.
To you reply specifically, once he became aware that his company was selling arms to the terrorist agents (or whatever they are referred to in the movie), he sets out to destroy those arms himself.
I don't think it was about siding with one country or another entity to decide who is right or wrong. To me, it was a matter of principle that his name has become associated with black market illegal arms deals, terrorism, and the death of the innocent. He fixes that himself by stopping development and then by testing his suit, destroying the illegally bought weapon installations throughout that region. I would think that from his perspective, he believed he was helping the U.S. military by doing (as a civilian) what the military could not do without risk of full scale war.
As to the motive and specific change of direction, that is more or less subjective. Your thoughts on why he changed, how he changed, and what you believe would be a more realistic course of change could absolutely be right in specific contexts; however, I think enough evidence is presented in the movie to heavily suggest that Tony Stark would most likely have taken the path that he did instead of what you're suggesting he would have done otherwise.