Arafat cannot accept any deal that makes peace and stability with Israel because all the warrior orgs among the arabs would turn instantly against Arafat and then against each other in a struggle for power. It cannot be any other way because the political/social structure among the Palestinian arabs is tribal (pseudo tribal but the relevant effects are the same) and there are no structures for legitimacy or change of ruler except power. Arafat continues to rule because the factions see more to lose by fighting each other while the struggle with Israel is in progress.
Arafat probably cannot survive either a real settlement or ultimate victory, i.e. driving the Jews into the sea. The same social system is in place in Afghanistan and it is obvious that the internecine war would be intense now if the US had already pulled out as happened when the Russians were pushed out.
Arafat probably cannot survive either a real settlement or ultimate victory... I agree. However, I also think that he's one of those who don't, and never have, wanted any kind of peace with Israel. I don't look at him as being trapped by the societal problems of the Pallies, but as an architect of those problems. He was never a builder, only a destroyer.