well, despite the way it may seem, things can be quite a bit worse for the Palestinians. I don't think Israel is risking its very existence. Thats a common arguement, especially among neo cons (so what, its a cliche, but its accurate so I'll use it). If you read some of their ideology, you'll see that even the tiniest consession is seen as risking the utter destruction of Israel and its inhabitants.
No, of course the Israelis are not a blood-thirsty mob. Though the Israeli government, especially the Likudniks, and the IDF do come quite a bit closer to that description. And neither are the Palestinians the fanatical terrorists that the Western media makes them out to be. The thing is, making the first step towards peace would be a meaningless gesture until both sides are ready to accept a peaceful resolution. And this means accepting a reasonable peace proposal, with conditions that can actually be accepted by the other side. Right now, it seems to me, and I may be wrong, that the Israeli people are not nearly as hungry for peace as the Palestinians. If you compare what a continued conflict means for the average Israeli and the average Palestinian, you'll see that the Israelis have less to gain and are therefor less inclined to make concession. Again, I should stress that I do not view the various Palestinian factions (Hamas, the PLO, the PA etc) as blameless.