I believe there is little doubt that there will be no settlement coming out of what occurred in Annapolis. The fact that there are official talks is a good thing though. It is likely in my mind that there will be peace for the West Bank and peace with Syria even, before anything substantial improves in Gaza, but that is likely not going to be a recognition of statehood. Furthermore, violence is likely to substantially INCREASE in the West Bank in the near future as Hamas attempts to increase its influence there. The Hamas leadership in Gaza is very opposed to anything that moves toward a final settlement and their influence is undermining Fatah's control even in the West Bank. Meanwhile, the leaked draft of the negotiating positions (from Haaretz last week) demonstrates why the sides can't agree on the premise of negotiations, much less make progress toward peace.
The document released after the conference in Annapolis included SOLELY the introductory language from the draft document as released by Haaretz. The sides were clearly so intractable in their primary negotiating positions that they couldn't make progress on them and therefore agreed to drop the issues from the document.
Below is what I saw in looking at the draft released by Haaretz. That draft is a very good exemplar of why negotiations have failed over the past 60 years and continue to fail today. Primarily, the continuing failure centers around the Palestinian's insistence on UNGA 194 being the basis of negotiations, but there are other issues as well.
The PA insists on a finite time table, with a final settlement at the end of Pres. Bush's term. Israel says, "no time table, we need to see results."
Israel insists that the Roadmap be followed and that the US monitor progress of BOTH sides toward its goals. That means the PA has to disarm Hamas as one of the earliest steps. Right now, at least in Gaza, Hamas is more powerful than the PA (Fatah) and the PA (Fatah) was reluctant to try that even when it controlled Gaza. It is questionable whether or not Fatah is strong enough even to disarm Hamas in the West Bank.
The PA insists that Israel make concessions PRIOR to the implementation of the Roadmap. This essentially violates the premise of the Roadmap, but may be the only way the PA can get onto the MAP at all.
The Roadmap itself is already outdated, having been based upon the Mitchell group's work in 2000 and not taking into account the dramatic changes that have occurred within the PA since, such as the death of Arafat, the election of Hamas, and the Hamas takeover of Gaza, nor the firing of Qasam rockets into Israel from Gaza, nor the 2nd Lebanon War, nor tensions with Iran, nor the Iraq War, nor the re-entry of Russia and the entry of North Korea into Middle Eastern politics, nor the military developments in Syria that resulted in an Israel air strike. It is woefully inadequate for the conflict in 2007-2008.
Israel says that negotiations should be based on UNSC 242 and 338 along with the Roadmap and Quartet Principles. The US agrees. This would result in Israel giving back "war won land" but not "all war won land," allowing Israel to create "secure borders" and not to withdraw to the 1967 lines. It also requires only that refugees from the 1967 war be allowed to return to Palestinian territories and NOT those from 1948 to Israel proper. Further, the refugees allowed to return to Palestinian territories may not include ALL refugees, since doing that could provide a security risk. Jerusalem, at least the bulk of it, would remain in Israeli control including the Old City and areas around Temple Mount, as well as the ring of suburbs (settlements) that now encompass most of the areas immediately North, South, and West of Jerusalem, though arrangements would almost definitely be made so that the Temple Mount itself would be under PA control.
The PA says that negotiations should be based on UNSC 242 and 338 along with the Roadmap, but vitally and problematically for Israel, UNGA 194. UNGA 194 makes Jerusalem in international city under the control of the UN. It requires the return of any refugees from the war of 1948 that wish to return to their homes IN ISRAEL and requires compensation to be paid for those who do not wish to return. 194 does not include any compensation to those Jews forced to leave Arab lands. UNGA 194 is a deal breaker for Israel. It cannot possibly agree to include 194 as relevant to current negotiations, much less as their basis. Insisting on bringing UNGA 194 to the table essentially insures the failure of any negotiations now or in the future.
Further, the PA has insisted to this point that Jews be removed from its future territories, but that not only may Palestinian Christians and Muslims be allowed to remain in Israel, but that any others who wish to go to Israel may. That is unacceptable to Israel and is a deal breaker. It would create a de facto Palestinian state in BOTH the PA territories and Israel. This is why Israel has insisted that the Palestinian side recognize Israel as a JEWISH state and the homeland for JEWS (which is clearly an attempt to say that it is NOT a homeland for Palestinians).
As long as these things continue to be the negotiating points of the sides, there can be no progress toward a settlement beyond cease fires. The only possibility for a longer term peace is for Israel to unilaterally determine its borders and to allow the PA to gripe about what it did not get, continuing to play the victim, incite violence against Israel, and keep its people suffering into the future.
Should the PA yield and attempt to compromise with Israel, there will be Intifada in Gaza and increasing violence in the West Bank. Should it not yield, the status quo will go on indefinitely and Hamas will continue to increase in strength in the West Bank unless dramatic action is taken to reduce its strength both in Gaza and the West Bank, essentially a civil war in the PA. I see no way for the PA or Fatah to avoid violence altogether. Fatah must either commit to a civil war or commit to a peace that may trigger a civil war anyway.
If Israel compromises too much, the current government will be ousted and almost certainly a far more right wing oriented government will come to power. Shas, which is the one of the few parties on the right willing to give land for peace, has already stated strongly that it will leave the coalition if Jerusalem is part of negotiations. The result of that shift would be a center-right coalition led in all likelihood by Bibi Netanyahu.
Progress could be made with Syria about the Golan and with the PA about the West Bank specifically, but not about total peace. One cannot ignore that Gaza and Hamas are excluded from this process, not only by the PA and Israel, but of their own choice. Hamas doesn't support the peace process, but supports continued violent resistance, even against Fatah and the PA leadership, much less against Israel.
I am not particularly optimistic about the prospects of lasting peace between Israelis and Palestinians in the near term.
I see the following as an analogy.
The Torn Canvas Bag
The Palestinians are holding a strong canvas bag that has a large hole in the bottom of it. The Israelis are holding lots of food. The Israelis say, "sew up the hole in your bag and you'll have plenty of food." The Palestinians say, "We want food now! We're starving!" Foreign language dictionaries translate these words as "It's the occupation stupid!" The US and Europe demand that Israel give food. Israel does. The weight of the food makes the bag stretch and the hole widens. Then it all falls through, but now the hole is bigger than the last time Israel gave food. Israel says, "Sew up your bag!" Hebrew dictionaries translate this as "Stop the terror and disarm Hamas and we can talk about ending the occupation." The Palestinians say, "We're starving, we need food. We can't sew up the bag." Translated: "How can we stop the violence against occupation when we're under occupation?" Israel says, "let us help sew up the bag!" The Palestinians say, "No. You will make more rips. Give us food and we promise to sew the bag." The Israelis are once again forced to give food and once again it widens the rip and falls through leaving the Palestinians with nothing and the Israelis with less food themselves.