By all accounts, the points of contention between Fallon and Bush administration officials centered on three points: 1) his belief that the indefinite occupation of Iraq is a disaster for the US military, 2) that diplomacy has a central role in American foreign and national security policy, 3) that war is not a credible policy for the US to pursue in dealing with Iran. The last of these was believed to be the key issue.
It is widely believed in media and political circles that despite the difficulties in Iraq and Afghanistan, American foreign policy is back under some kind of adult/mainstream management. In other words, that we've left the Cheney/Rumsfeld era behind for a period of Gates/Rice normalcy and that Iran regime change adventurism is safely off the table. But put together what the disagreements with Fallon were about, the fact that the president chose him as someone he thought he could work with not more than one year ago, and the almost unprecedented nature of the resignation and it becomes clear that that assumption must be gravely in error.