Okay, here's my two cents. I know a number of Palestinians living in the West Bank (not Palestinian-Americans) and a number of true-blue Israelis, so here's the feeling I'm getting from my friends.
As far as the PA goes, it's all the Palestinians have right now. Many of them see Arafat as their great leader and want him to be at the head of their government. On the other hand, some see him as a symbol of the corruption of the PA, but they are the minority.
Of course, in any final solution, the terrorism/freedom fighting has to end. Naturally, if a solution is achieved that is acceptable to Palestinians, the terrorism from that side will end because they will have obtained their freedom. As for Israel, one would assume that they will abide by a true peace agreement.
As far as Jordan being recognized as the Palestinian state is concerned, I think that's crap. The way I see it, Palestinian nationalism is at an all-time high. My Palestinian friends insist that they have a state already. They don't want to be absorbed into Jordan because they are citizens of Palestine. They have a flag, a national anthem, a passport, etc. In my opinion, they don't currently have a state but in any solution, I think a Palestine does need to be established.
As far as Gaza goes, I think that it should either return to Egypt or be a part of a Palestine. The people who live there identify themselves as Palestinians, so they would want to be a part of Palestine but their distance from the West Bank would create a separated state. It might be easier to have Gaza absorbed into Egypt, but I don't know exactly how well tha would work out. Why does Israel want Gaza anyway?
In terms of refugees, I think that some sort of rehabilitation is in order. At the very least, I think some sort of compensation should be payed to the refugees after they fled/were kicked off their land back in the beginning of this mess.
Peace and normalization will happen naturally. I believe that right now, the biggest problem is the refugee situation. I asked one of my Palestinian friends if she would settle for peace right now if Palestine was recognized as a state and the IDF withdrew and she said no. She told me that she would only accept peace if the refugees were allowed to return to their homes in Israel. She said she doesn't care if her father and brothers are killed in the process, but it is important to her that the Palestinians living in refugee camps have their lives improved. Only then will she make peace.
So, Jordan? Forget about it. This proposal sucks. It sounds like it might be a bit of a landgrab for Israel and I don't understand why Israelis would want sovereignty over areas that are almost 100% Palestinian. That doesn't make sense to me.