They needed someone to tell them this?
I will answer my own question: Yes, they do. If you look at U.S. policy through Carter, Reagan, Bush, Clinton and now Bush, you see punitive military strikes that are rendered moot by appeasement. With Bush now proposing a Palestinian state, the Palestinians are saying: "See, we hit America hard and now it gives us what we want." When the Palestinian state inevitably doesn't pan out, the Palestinians and their terrorist groups can only come to the conclusion that more and harder strikes are needed.
And, as I had proposed in other place, the palies from the liberated lands should be crammed into the Gaza Strip. When all of Judea and Samaria is pest-free, and all of the palies are in Gaza, perform a reverse annexation of Gaza - forcefully return it to Egypt. Then, The Wall would be needed only on the border between Israel and Mizraim...