The issue is and has always been about land...who owns,, controls, and receives the economic rents from it. From the beginning  of Israel the desire has been that the Palestinians issue would be solved by having them absorbed by Jordan on Jordanian soil.  The settlements have been a disaster for all sides since the movement started, largely as a result of an "Aliya" by wealthy, educated young American Jews who somehow feel recreating Judaea and Sumeria on lands occupied as a result of war is reasonable.  How could one expect the Palestinians to have reacted any differently?

Poll after poll show most Israelis are quite balanced in their views about their future in a 2 state system, however their government is overwhelmed by the radical, rabid, ultra-conservative, orthodox religious minority.  Perhaps one day Netanyahu  and his ilk will be mature enough to realize it is possible to be both Jewish and democratic for they will not win this war of attrition. Better to make peace now.