I think it is a mistake to conclude that one side or the other is incapable or unwilling to agree to the peaceful co-existence of both a Modern State of Israel, and a Modern State of Palestine, just because each side loudly complains about the unclean hands of the other side.
Public opinion polls conducted in Israel and the West Bank among both Jews and Arabs overwhelmingly show that the people on both sides want a solution. This is true even though both sides can rattle off a dozens and dozens of ugly accusations against each other.
I apologize for stepping into your debate, but I sorta wanted to make a point. Even two guys ripping into each other in the politics/religion section (famous for divisiveness) can both agree on the two state solution. It's time for it to happen.