front end editing using iFrames, best approach?

Using a custom template and wp_update_post you should be able to build your own edit/add post pages in your sites frontend. There are also various plugins available that attempt to do similar things.

iFrames can be done, but it will need some checks in functions.php to check for a get variable and add conditional stylesheets to hide the menus etc. Any users able to do this would also be able to bypass this and go directly to the backend themselves.