They read world opinion well. They turned down essentially what they asked for, started the infitada, and it cost them nothing.
And they moved the starting point for "negitiations" forward. Even GWB BEGINS with the offer they turned down. What did they lose, a few martyrs?
From the perspective of the terrorists (and they have time on their side) they think they're winning, against Israel, and against the US.
Peace will only come after a decisive victory on the ground.
Which Israel would have accomblished in "67" had the U.S. not stayed her hand. Israel was poised to overrun Egypt and much of the ME after being attacked by the coalition of all the Arab states. "Land for peace" deals only eroded Israels security over the years as the American forced retreat moved her into more indefensible and unsecure positions. The U.S. may be Israels only ally. But we have been a poor one. And now the barbarians are at our own gate.