I find it ironic that those who often take a skeptical position with regard to the US's prevailing geostrategic raison d'état are so taken by Gen. Petraeus's pronouncement on the Israeli-Palestinian conflict. I am no soldier-scholar, but while I'm sure Israeli settlement expansion poisons the atmosphere in the Islamic world, I can't imagine Islamicist militants are blowing themselves up for a two-state solution. Or, put another way, there are zealots on both sides of this conflict.
I think the Obama administration needs to put pressure on both parties, and with regard to the Palestinians this is about more than merely healing the Fatah-Hamas rift. It also must be about ensuring that a future Palestinian state will remain demilitarized and that the religious sites of all faiths will remain protected and open to all (as, let us recall, they were not under Jordanian suzerainty in 1948-1967, and as the Temple Mount/Haram ash-Sharif is not under waqf custodianship). Without these guarantees, the West Bank will remain an international flashpoint.
Despite the storied power of the Israel lobby in the US, American leverage over Israel will no doubt be ultimately decisive in bringing that country to Taba-style terms again. The Palestinians, on the other hand, hear many voices counseling permanent militancy. That is why there is no substitute for a mutually agreed and guaranteed peace settlement, as opposed to a prior thrashing of Israel to give up any interest or claim over East Jerusalem before the bargaining begins. Let us have no morality tales in this endeavor, nor expectations that one last smack at Israel will resolve all of America's woes. The best we can get is an imperfect agreement for a liveable peace.