Ok, so i have a site with an iframe that directs to another site. In internet explorer, since the standard "cookie acceptance" is set to Medium, it blocks the cookies from the other site.

Can i add a p3p policy to my site to unblock this? or does the other site need to do that?

Just speaking from a user's perspective, I block all third-party cookies, and use a hosts file to rid myself of a lot of advertising that is supplied by third-party websites. Consequently, I see a few sites that show a "This page cannot be displayed" message or "Firefox could not connect" message, or nothing at all, in the places where ads are supposed to appear. Saves me the trouble of running Ad-Aware and deleting a bunch of tracking cookies.

Edit: I do keep all session cookies for the session.