"Why are there dictators who are allies one day and the worst enemy, the next? "

Some countries are real allies, and others coincidence and/or can possibly be persuaded to coincidence with US interests [and US interests as general rule are aligned to interests of our allies]. True allies are those countries which we have treaty agreements- such as NATO members and/or we have a history of cooperating with them. It would incorrect to characterize Saddam's Iraq as an US ally.

"Saddam was the western rempart against Islamist expansion from Iran."

Some people looked at it this way. Another way of looking at it was that Iran was hostile to US- illegally taking American hostages- a violation of international norms. We didn't [and still don't] have formal relations with Iran because Iranian didn't want relations. Since a large basis of their revolution was that Shah had friendly relations with US and was interested in "modernizing" the country- those who took over power were anti-western. And Saddam saw Iran as a threat, so Iraq was an opportunity for US to get better relations- Saddam might need more friends than the Soviets and French. Btw, by US improving relations with Iraq, it also puts a some pressure on Iran to desire better relation with US.

"Then, he wanted to take over Kuwait and got signals from the then US embassador that the US wouldn't interfere, and he invaded Kuwait."

Saddam got signals that the US didn't want to become involved in the diplomatic resolution of the difficulties, because the Kuwaits and other Arab leaders told the US that this was an Arab matter and didn't want US getting involved. The idea that the US would give a green light to an miltary invasion of Kuwait is simply foolish. The facts are that US warned Kuwait that Saddam might attack- not something you do if you supposively giving green lights.

"It's only then that he became demonized, because that behavior was so contrary to basic international laws."

The US spends billions of dollars and decades of time trying to strengthen international laws. It is a large part of our national interest to have international agreements which actually mean something and aren't just a piece of paper. Having some Jackass declare a sovereign nation as his province, *should result* sequently in this same Jackass to be found hiding in a rat hole.