The essential problem with the conflict in Palestine is that both sides have cause to fight. I believe that an arrangement to cease this useless conflict has to be based on two differing levels of responsibility on the two sides, immediate and lasting peace. This, of course, is dependent on the Palestinians electing a government whose sole mandate is the elimination of Israel.
Firstly, both sides have to agree that immediate peace is the primary responsibility of the Palestinians and their representatives. Israel has shown itself to be willing to open borders, supply humanitarian aid, and reduce settlements given a long enough period without suicide attacks and rocket fire. It is for this reason that Palestinian Arab faction has to assume the responsibility of immediate peace.
Secondly, Israel has to acknowledge that it is the responsibility of the Israelis to forge a lasting peace. This has to acknowledge the rights of the Palestinians to trade, international recognition as a state, diplomatic relations, and internal security.
The current prime impediments to peace, both immediate and long-term, are two-fold: bad timing of international involvement, and the election of Hamas.
The bad timing of international involvement is simply explained. Large states with an interest in the area, notably the US, only get involved in the conflict during periods on unrest, or for other political reasons. The most fertile time to generate a lasting peace in the area is during periods of temporary peace, when you can start changing the hearts and minds of the people on the ground. Unfortunately, this is exactly the the international eye turns away.
The election of Hamas is an additional problem, as their entire reason of existence is the elimination fo Israel. This means that even a short period of stability can never last, due to the unfortunate fact that peace will reduce their political power. It is for this unfortunate reason that Hamas must be disabled in Gaza. It will always be in their political and ideological interest to derail and dismantle any attempts at a lasting peace.