Yes it really is unfortunate that Iqbal is so misunderstood.
It is hard to objectively analyse his views from contemporary perspective because one has to be aware of the specific context of the time when he lived but:
From wiki:
In his speech, Iqbal emphasised that unlike Christianity, Islam came with "legal concepts" with "civic significance," with its "religious ideals" considered as
inseparable from social order ...
Iqbal thus stressed not only the need for the political unity of Muslim communities, but the
undesirability of blending the Muslim population into a wider society not based on Islamic principles ...
He thus became the first politician to articulate what would become known as the Two-Nation Theory — that Muslims are a distinct nation and thus deserve political independence from other regions and communities of India. However, he would not elucidate or specify if his ideal Islamic state would construe a theocracy, even as he
rejected secularism and nationalism.
... would deliver speeches and publish articles in an
attempt to rally Muslims across India as a single political entity.
If we are resolved to describe Islam as a system of
superior values, we are obliged, first of all, to acknowledge that we are not the true representatives of Islam.