[A] large majority of Israelis have already accepted the idea of leaving the West Bank….They have forced their government unilaterally to define the proximate border with the West Bank by completing the construction of the separation barrier that incorporates 8.5 percent of the West Bank[1] and leaves most of the settlements on the other side.[2]  Polls show they would support the territorial arrangements for the West Bank in the Clinton parameters provided that the settlement blocs are incorporated into Israel.[3]   Moreover, Clinton’s proposal that the Arab suburbs of Jerusalem be in Palestinian hands and the Jewish suburbs in Israeli hands[4] is no longer heretical, as it was when Barak first proposed it at Camp David.[5]

…

Ideally, Israeli and Palestinian leaders would have the courage to stand in front of their people and explain that in order to achieve peace both have bitter pills to swallow: Palestinians would have to give up their claim to a right of return to Israel in return for the implementation of that right in the Palestinian homeland; Israelis would have to concede their claim to Arab parts of Jerusalem.

From Martin Indyk, Innocent Abroad: An intimate account of American diplomacy in the Middle East (New York: 2009), pp. 408-9, 413

In other words, Palestinians must forfeit 9.5 percent of the territory to which they have legal title, depriving the Palestinian state of critical land and water resources and fragmenting what remains; they must forfeit their legal title to East Jerusalem, which constitutes the hub of Palestinian life; and they must forfeit their legal right of return. On the other side, Israel must forfeit control of Palestinian territory to which it has no legal claim and the population it has all along wanted to be rid of. 

[5] Indyk omits mention that the route of the Wall incorporates East Jerusalem’s urban center on the “Israeli” side, and even places more than 50,000 Palestinian Jerusalemites on the “West Bank” side of the Wall.