Yes... I still like 'em 35 years later...
I was just playing a game as the US on the Wargameroom interface and had only the NATO token in Iraq, while my opponent had 7 cells and rolled a successful Major Jihad. As I expected my prestige went to one due to the fact that I had troops(NATO token) in the country during a change to Islamic Rule.
After this point thought, I was unable to disrupt his troops in Islamic Rule Iraq with my two NATO troops.
Should I be able to?
See 7.1.1. The only Operation you are allowed to do in an IR country is Regime Change.