Ol' Mad Vlad has done a short and sweet demolition of said argument. From the contemporary UN report into the revolution:
When these Soviet forces succeeded in crushing the armed uprising, it was again the Hungarian workers who continued to combat, by mass strikes and passive resistance, the very régime in support of which Soviet forces had intervened. In every case, the workers of Hungary announced their intention of keeping the mines and factories in their own hands. They made it abundantly clear, in the Workers’ Councils and elsewhere, that no return to pre-1945 conditions would be tolerated. These workers had shown all over Hungary the strength of their will to resist. They had arms in their hands and, until the second Soviet intervention they were virtually in control of the country. It is the Committee’s view that no putsch by reactionary landowners or by dispossessed industrialists could have prevailed against the determination of these fully aroused workers and peasants to defend the reforms which they had gained and to pursue their genuine fulfilment.
There's a much more succinct quote in the ISJ article celebrating the uprising:
When the claim was later made in Budapest that what was at stake was a counter-revolution, the Borsod County Workers’ Council simply said, ‘You have only to pick up the telephone, and in three hours we will be there, the workers of Ozd, Diosgyör, Miskolc, all 20,000 and armed’.
What truly made that time significant was the simultaneous Suez Crisis, when both the British and French empires recived the final and fatal blows. At the time the question of politics was always posed, Washington or Moscow? The left, even the genuine anti-stalinist left, had reached an empasse. Even great men, such as Issac Deutscher and George Orwell, felt they had to choose.
The British political scene was divided between the Labour party, which was pro-washington, and the Communist party (which had tens of thousands of members at the time), which was pro-moscow. If the two events, Hungary and Suez, had happened any significant time apart it would have been possible for lefties to swing from support for one empire to another. As it happened, both market capitalism and stalinist state capitalism were exposed for what they were. What's more they were exposed by the actions of ordinary workers, who had been written off as a force for change.
The slogan 'neither washington nor moscow but international socialism' became a realistic possibility. Socialism's slow recovery from the disaster of the mid-twentieth century began in October 1956.