Part of the problem with Israeli politics is that it's so fractious. The religious parties are in the minority, but the two main parties (Likud and Labor) pander to them because they are the ones who hold the balance of power in the Kenesset. There is no way to form a government without them, and this is why we have such things as El Al being banned from flying on the Sabbeth, and the imposition of theocratic laws. Secular Israelis (who represent the majority) resent these things, but the religious' parties demands Israel become a theocratic state are heeded because without their support Israel becomes even more ungovernable than it already is.
Also, Arafat has lost control of the PA. Hamas is seen as credible because they have established the infrastructure the PA was charged setting up under the peace process but ultimately failed because of corruption, and Arafat's love of demigoguery. That's why their suicide bobmers have so much support among ordinary Palistinians. Arafat, for his part, is completely paralyzed because he has promised much and delivered little resulting in desertion of support. He may be irrelevent now, but what may take his place is even more unpaletable.
Yet each terrorist attack results in Israeli reprisals resulting in more terrorist attacks, and so on... The Palistinians do not engender much sympathy because of pictures of devistation from suicide bombers seen on the news underscores the old stereotype of the Palistinians as terrorists, yet support for Israel's provocotive moves is also waning because each clampdown just increases discontent among the Palistinians and pictures of treatment of refugees seen on the same programs are underscoring the Israeli reputation as bullies.
Hence, an old Jewish joke:
Q: Why is Israel the promised land?
A: Because it's been promised to everyone, and no one is allowed to claim it.
Sad, but true...
The customer isn't a moron, she is your wife -David Ogilvy