The Palestinians reject the sovereignty of Israel. They could have kept their land and lived in peace with Israel but they chose war in 1967 and have never changed their position. Only in Bazaro-world does the loser of a war dictate the peace. Article 21 of the PLO Charter states that the Palestinian revolution must "reject all solutions which are substitutes for the total liberation of Palestine." So the sovereignty of Palestine could only mean the elimination of Israel. The Palestianians declare that there must be a winner and a loser, and so far they have been on the losing end.
The Arabs backed the losing side in both WWI and WWII. So, is it any surprise that the west came in and supported leaders that they could do business with? Or would it have made more sense for the west to support leaders that they couldn't do business with? Perhaps in Bazaro-world.