Diplomacy can be progressed in Iran as this country has a lot of new potential. It all depends on how willing the government and other Iran's officials are to progress in this regards. If they are willing, the chances of diplomacy are high and if they do not cooperate then nothing can be said much.
I believe there will be progress with diplomacy with Iran. Iran seems very interested in nuclear energy and it would seem that they are willing to prove this. I think Iran is on much better footing than they were five years ago. A change in leadership seems to have made a lot of improvements, at least in their foreign affairs.
It is clear that Iran cannot remain on its current path of developing nuclear weapons for malicious purposes. Western sanctions have destroyed the economy of Iran, and they people cannot survive much longer without free trade. Obama's policies have had a beneficial effect, and there will likely be a breakthrough in the future.
It is indeed possible that we will have made progress with the country of Iran. Not only the United States of America but, other countries as well are making great progress with the country. What is being acomplished is going much futher than what we have seen in the past.
Granted I do not know much about the current state of the Iranian economy after these sanctions, and while it is possible for reconciliation, I think that the way we had/have been dealing with Iran was that we would tell them what would happen if they crossed certain thresholds. That however is the worst possible way to negotiate. Basically if you are going to have effective negotiation you need to leave enough mystery in your responses to make them think that you would do something rash that could potentially destroy everyone involved. That was how the cold war was dealt with, when there have been H-bombs in both arsenals. You had to play it where they did not think you were weak but still crazy enough to destroy all life. While this might not be as extreme as with Iran, it is the basic negotiation tactics that lead to brinkmanship and results. However the presidents in power for the past decade have had serious negotiation and logical reasoning flaws (sunken cost fallacy for Bush on Iraq and Afghanistan, and these kind of negotiation tactics from the Obama administration), so I doubt that if we do somehow get back on the right foot in negotiation that we will still have the credibility when we get to the negotiation table.