Umm...Iran...I hate to break this to you, but The West has been making fun of the holocaust for years.
For example, from an episode of South Park:
Jewish Kid: Is anyone else having problems concentrating on this? I just can't seem to concentrate.
Cartman: Maybe we should send you to a concentration camp.
I'm sure a few people were offended, but they didn't go apeshit and burn down Comedy Central. So go ahead and hold the contest; hopefully the cartoons are funnier than the Muhammed ones. We already know the answer, though: We'll still believe in freedom of speech, and if Iran doesn't, then they can stop reading other countries' newspapers and leave them alone.