I don't believe that a peace agreement between Israel and the Palestinians is possible at the moment. It would mean that the Palestinians would have to publicly resign to the theft of their lands. The wounds are simply too fresh for that. It will take decades before that changes. On the other hand it is understandable that the Israeli's won't sign an agreement when the Palestinians see that only as a step to bring them closer to victory. They have been burned twice this way already: first after the Oslo Agreements and then after their withdrawal from Gaza.
Instead I believe the focus should be on how the Israeli's treat the Palestinians. The continuing theft of Palestinian land on the West Bank and the economic blockade of Gaza and to a lesser extent also the West Bank are both unfair and a violation of international law.
Unfortunately the Palestinians have little leverage to change their situation outside violence and seeking international recognition. But neither will be really helpful. Violence will only backfire - like it has done in the past - and worsen their position. More international recognition is nice but the US will do anything to prevent that it really hurts. Outside pressure by the US could do the job for the Palestinians to at least improve their lives but unfortunately Obama is wasting his leverage on vainglorious peace talks instead of aiming for concrete goals.
Israel should gradually reduce its presence on the West Bank. However, to prevent any triumphalism on the Palestinian side, this should happen gradually.
In the mean time the whole negotiations look more and more like a shadow play where both sides try to avoid to be blamed in the press for obstructing the negotiations.