The Arab world cannot move faster than the western world. Currently the western world dictates what Arabs must think. If you ask individual Arabs from the Gulf or even Saudi-Arabia, you will find much more support for Israel's side than you would reasonably expect. But the west, particularly Europe, continues to support whomever promises to kill the most Jews for some reason.
Arabs have long stopped sending money to Palestinians. The Arabs also won't fight wars for their "Palestinian cause" any more. Syria is the only Arab country still hostile to Israel. Lebanon is hostile to the extent that Syria manipulate them. All other Arab countries are on rather friendly terms with Israel if you ignore the posturing. The Muslim protesters in the west are also not so much Arabs as they are Pakistani, I think. And I have also heard of Egyptians living in Ireland who are surprised by Irish antisemitism and are offended when irish antisemites think that they can talk freely in the presence of an Egyptian. (It's not customary to talk to strangers about how bad other people are in the Arab world. That's a European custom.)
Because of this the Arab world cannot slap sense into the radical Palestinians, because radical Palestinians have so much support in Europe.
I think Bibi (Netanyahu) should simply propose my plan in Washington, tell the PLO to accept it or invite Israel for new talks from scratch (divide West-Bank 50/50 and start from there) and fly home. If Abbas is smart he will accept the plan because it will make him and his cronies kings of "Palestine" with free access to the Israeli economy and a return for the "refugees" who as citizens of Abbas' state could travel to Israel freely and live there if they like.
Once Abbas accepts the plan, the story is over. The war won't be, but it will take Europe a long time to find a new official "Palestinian" ally and the UN cannot easily drop Abbas as the "official representative" of the "Palestinian people" they made up.
Ideally the "Palestinian" state would become part of Jordan which would gain a port in the mediterranaean (Gaza) and access to Israeli harbours. By proposing the EU-like federation the question of Jews settling in Transjordan will come up, making it easier to discuss the issue of Arabs settling in Cisjordan.