The Palestinians don't want peace.
If they'd agree to end terrorism and actually show good faith in doing so, the Israelis would give them the entire west bank and gaza, and probably a lot of money too.
But they have proven repeatedly that they don't want peace. Their desire for revenge is too strong. It is truly a tragic situation.
No, neither side really wants peace. The sort of peace that Israel wants is would relegate the Palestinians to second class citizenry forever.
Generally I support Israeal when they are up against other middle eastern nations but their actions against the Palestinians are unexcusable and their attack on a US ship is unexcusable as well (especially since they won't apologize for it).