They are not very promising. Arafat doesn't want peace. And he is not an effective leader. He is, however, a recognized figurehead. If he is killed or jailed, he serves as a rallying point.
The best role is to keep him as a hostage.
Beyond that, I'd seek another person to negotiate with. If the Palestinians didn't want to pursue that, I'd reoccupy the west bank and Gaza. I'd go door to door and disarm the whole of the two territories.
My tollerance for Palestinian terrorism is fast coming to an end. Lebanon, Syria and Jordan have had the same problems with the Palestinians in the past. Israel may have to expell them all from Gaze and the West Bank.
This has got to stop.
I would make a public speach in which I would address the Palestinians. I would state that as much as the Palestinains might find it hard to belive, I wanted peace and prosperity for them too. I'd state that on behalf of my nation I would be prepared to negotiate in good faith on all issues, settlements and territory to be included. But I would also state that we could no longer tollerate the terrorism.
I would state that one of two fates was going to befall the Palestinians. Either they would negotiate and obtain land and a free state, or they would be expelled from the West Bank never to return.
Then I'd follow through.