"Does anyone actually believe the Palestinians will ever actually agree to a meaningful peace with the Israelies?"
I'm sure most people don't and the few who sincerely do are idiots. On the other hand, it is the position of most of the world, not because it's truly believed, but because it relentlessly puts pressure on Israel to always make new concessions in pursuit of "peace".
Israel has pretty much decided what the border will be by staking out the path of the "fence" (which is partially built at this time). Bush agreed with the idea that Israel would never give back all of the conquered territories---so that is about as much international approval as Israel can expect to ever get. (Just eyeballing a map of the situation, a map that never appears in newspapers that imply that Israelis want to take over about two-thirds of the West Bank vis-à-vis the fence, I would say the Israelis are going to snatch about 1/7 or so of the West Bank, utilizing the fence.)
One of the problems Israel is, in effect, working out right now in Gaza is, what do you do about the missiles? That problem will presumably be a lot worse when the final partition counts.
Another problem is that there are tens of thousands of Israeli settlers currently living on the wrong side of the fence. Moving all of them looks to be politically impossible for the time being. A few are currently being removed from illegal settlements---that is to say settlements that were never approved by the Israeli government in the first place. This relatively minor procedure is being met with violence on the part of the settlers and is already having an effect of partially carrying Israeli society apart.
The problem of pursuing this rational solution is made worse by fundamentalist Jews, now being joined by fundamentalist Christians, who claim, in effect, that the West Bank in it's entireity was given to the Jews by God. That means that removing any of the settlers is a sin and will result in the destruction of Israel or something like that.
Or, to put it another way, adding to the threat to Israel's existence caused by religious craziness on the Muslim side, we now have religious craziness on the Jewish and Christian side.