Good point. Palestinian leadership doesn't want a two-state solution. They want to eradicate Israel. Pretty hard to find a middle ground.
While I certainly don't consider Netanyahu to be a good faith actor in any of this (which his actions and lack of trustworthiness will be used as an excuse to turn down the deal without losing face)
Ehud Barak was arguably the most Palestinian-friendly Israeli PM their country ever had. (he was popular enough with them that Arab-Israeli voters actually helped him beat Netanyahu in the 1999 elections they held)
I had to go back and look at the details of the deal Ehud Barak was putting on the table to refresh my memory, I misspoke before by a little bit, but I wasn't far off.
- Israel would annex parts of the West Bank (roughly 9%) but give land swaps to the Palestinians to make up for it in order to build a corridor between the two territories
- Palestine would get all of Gaza
- Shared sovereignty and special arrangements for the Temple Mount/Haram al-Sharif.
- 5 year sunset on Israeli military presence
- Shared sovereignty for Jerusalem (the one and only time that's ever been offered)
- Limited "right of return" (with a compensation fund to pay Palestinians who wouldn't be able to pursuant to the land swaps)
- Settlement freeze
Arafat shot it down for reasons of "full right of return" and "No Jewish presence in Arab lands" and "river to the sea" reasoning.
So yeah, you can't exactly negotiate or find a middle ground on that. Israel was meeting them 75% of the way to their position in the Camp David Summit negotiations in 2000, and they still turned it down.