I think that Benyamin Netanyahu is a corrupt nutjob, and his economic policies, specifically his his economic and fiscal embrace of Thatcherism, are almost as crazy as his security policy.
That being said, one of the goals of negotiation is to negotiate and the Palestinians have been consistently infantilized in this process.
In any other negotiation, whether it be the UAW and General Motors, Croatia/Slovenia border discussions, or two people dickering over a used car, people try to maximize their advantage in a negotiation.
To use the case of the used car, it means that the price on the window is higher than the dealer really needs to sell it at, and the car has been repainted, and the customer comes with a magnet to look for bondo and paint jobs, and parhaps a carfax.com report, and they start off very far apart.
This is what happens in negotiations. Both sides take positions as a starting point that are more extreme than they expect to actually get, and try to define the situation on the ground (paint jobs, bondo, etc.) to bolster their positions.
This is what happens, and once this does happen in negotiations between the Israelis and the Palestinians, things will move forward, toward an (inevitable) Palestinian state.
People who believe that the normal give and take of a negotiation process is somehow unfair and unjust, and must be somehow avoided, it will forestall meaningful negotiations. It raises unrealistic expectations, and in the case of the Palestinians, those expectations mean that real negotiations, which will produce a less than optimal solution for everyone on both sides, create a very real risk of the death of whoever signs off on such a deal.
It probably won't be Netanyahu who will be the one to finish the deal, but someone will.
As to the what a Palestinian state would look like, I rather imagine that it will be a typical failed Arab government, much like the corrupt and autocratic Egypt, Sudan, Algeria, Jordan, Iraq, UAE, etc., but it will be their failed government, and that is what they want.
One final note: A solution to this problem will not solve any other problem in the world. The idea that all of the problems in the Middle East somehow run through Jerusalem and Ramallah is as nonsensical as it is widely held.
This does not make the problem not worth solving. This is worth solving on its own merits.
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