That is why all the talk of peace is a sham. The ideas of peace that float around all require Jews to admit they have a lesser status in the area than Arabs, they are based on the expectation that having land and dominance is the key to Arab expectations. The Arabs are not looking for peace they are looking for land and dominance and if they cannot have it they won't even pretend to want peace.
You're right. Until there's someone to negotiate with who recognizes that, if you create a palestinian state, palestinian refugees need to live in it, there's nothing much to negotiate. GWB came close, but changed his mind.