The Security Wall and free transit are two different issues.
The Wall (beyond the 1949 cease fire line border) prevents Palestinian terrorists from sending in suicide bombers into Israeli cities. It has been a resounding success, stopping almost all homicide bombing activity. Rice did not demand the whole Wall come done, but suggested that it will need to come down in places, or be moved (closer to the 1949 "Auschwitz" border).
The transit issue is that Israel is supposed to construct a highway between Gaza and Palestinian areas in the West Bank. "Free transit" is being requested.
Either of these moves will be disastrous for Israel and I hope they say "No" to both.
I hadn't realized the "transit issue" had to do with a land route between the territories. Think you're right - they need to say NO on both issues. Can't figure why some people are against this Wall, except that for some any annexation of West Bank territory is a no-on.