Two views, first from Walter Russell Mead:
The real problem is the failure of Israel and its friends to counter the grand strategy of the Palestinian resistance groups that, over and over, manage to put Israel in situations where it has no good choices and where its successes don’t make things better — but the inevitable failures and missteps cost dear. Israel’s policy toward the Palestinians is a strange mix of enduring success and strategic failure. On the one hand, Israel keeps winning wars, defending its borders and, slowly, getting treaties signed with its neighbors. On the other hand, in 62 years of independence the Israelis have never managed to develop a vision for the Palestinian future that can bring an end to the conflict between the two peoples on workable terms. Constantly on the defensive, Israel must simultaneously defend itself against terrorist attacks while fending off global pressure to do something, anything, that will satisfy the Palestinians.
The long view is that prior to 1947, Israel’s founding generation squabbled over whether to claim all of the territory that today comprises Israel, the West Bank including all of Jerusalem and Transjordan; claimed everything west of the Jordan River; settled for as much as it could get and since then . . .
Israel is the only state in the region that has gotten larger. Considered as an institution, Israel has spent sixty-plus years adding and consolidating its control over the territory it wanted in the first place.... This happened formally in the case of East Jerusalem (annexed in 1967) and the Golan Heights (annexed in 1981), and informally every single day in the West Bank. Israel signed the Oslo accords in September 1993. That year there were 111,500 settlers in the West Bank and 152,800 in East Jerusalem. By the time of Camp David, those numbers were 193 thousand and 172 thousand respectively. There is no year since Israel began the settlement program in 1972 where the settler population in the West Bank, East Jerusalem or the Golan Heights shows a decline. The settler population of Gaza increased every year too, topping out at 7,826 before theunilateral withdrawal in 2005.
Viewed institutionally and leaving moral questions aside, it counts as a triumph of grand strategy. Israel bought off Egypt with Egypt’s own territory. It convinced Jordan to bow out, and plain beat Syria like a rodeo clown. Lebanon could be broken any time and was, and the Lebanese were always falling all over themselves to help. At this point, Israel has also destroyed the ability of the Palestinians to mount any consequential resistance of their own. Just as Hezbollah couldn’t occupy a single Israeli exurb in a trial of a thousand years, no Palestinian organization can stop Israel from planting its flag on any particular spot of the West Bank for so much as a week.
The other dynamic at work, which both Mead and Henley address, is the Palestinians refusal to adopt a loss-minimization strategy. They've consistently refused deals as intolerable compromises, instead of taking half (or less) of a loaf, consolidating their position, and building from there. Mead seems to think the Palestinian strategy is working because Israel can't seem to placate them, while Henley thinks the Israelis are winning. If facts on the ground matter, than I'd have to side with Henley. With each passing year, the Palestinians will get less and less of what they want, and the Israelis, more. Israel's enemies can terrorize but they are not in a position to reverse its gains.