Steven den Beste has a very astute piece on the options for victory in the Israeli/Palestinian conflict. At this point, every option short of a Palestinian surrender isn’t good for either side. Now that Israel has the potential for sub-launched nukes, any attempt by the Palestinians to use force against Israel will lead closer and closer to their own annihilation.
The Palestinians may yet get their own state, but I concur that it cannot be in response to the intifada. It has to come from a demilitarized and throughly pacified Palestinian population. Unfortunately, the chances of having that condition met grows smaller as the radicalists continue to fan the flames of hatred. In the end, the Palestinians are likely to be the victims of their own terror campaign as Israel finds that the only way to deal with them is to expel them from Israeli territory and seal the border behind them.