I have recently come into a new and slightly different understanding of this part of the prophecy, thanks in large part to HubPages discussion forum.
The two legs of iron represent two apparent kingdoms made of the same system (same government). There are many theories on what this means but it seems to most closely represent the Eastern and Western Roman Empires. We are very familiar with Western Romanism but the Eastern seemed to disappear with the destruction of the Knights Templar. However, there is strong evidence that the Templars were able to implement a new system of order through secret societies and thus kept their version of the empire alive. Interestingly enough, Mohammad's first wife came from the inner circles of the Templars and Islam carries much of the same traditions and core beliefs that the Templars held.
Some theologians suggest that the clay represents the fragile nature of the final kingdoms. I now disagree with this. "I am the potter, you are the clay" says YHWH. Clay would then not represent just people, but God's people in particular. Miry clay seems to then represent Gods people who are in a polluted state - they are impure and they're mixed in with the ideology and governance of the Iron Empire (Rome).
I find it fascinating then that at least here in Western civilization, all Christians (even Protestants) bow to Rome. All of our traditions, religious services, and even understanding of the Diety of God come from Rome - which is truly a mixture of Saturnalia and Mithraism. All Christians then are polluted by the traditions and teachings of true paganism, brought forward to our times straight out of Babylon.