The right thing? I think the right thing would be to say...the USA couldn't care less what happens there. You guys have been fighting there since Joshua crossed the Joran river. We don't care. Let us know when one of you defeats the other because we'd like to be able to visit Jerusalem and the surrounding areas now and then.
In the mean time, we have real issues that affect American citizens.
That would have been a good policy to have adopted in 1967. Unfortunately, for the past 30+ years we have involved ourselves so heavily in the conflict that we cannot simply throw up our hands and leave. It would completely destroy our relationship with countries like Jordan, Egypt, Morrocco, and others whose cooperation we need in our fight against Al-Qaeda.
We need to bring about a settlement, and then, and only then, can we wash our hands of the conflict. Unfortunately, the Israeli lobby will never let us do that, but one can hope.