Honestly, it's not a bad point.
"Why should the Arabs make peace? If I was an Arab leader I would never make terms with Israel. That is natural: we have taken their country. Sure God promised it to us, but what does that matter to them? Our God is not theirs." -David Ben-Gurion
It needs to be some separate military force coming in from outside and making "both sides" behave. Primarily, the "both sides" of the Israelis since they're doing the overwhelming majority of the killing. And then as if by magic I think you would see a lot more peaceful situation.
Enacting a Palestinian state with Israelis running around all over it taking farms or killing kids whenever they feel like won't do a damn thing. It would be good for them to have representation on the world stage, that would come with recognition and would cast what the Israelis are doing in a somewhat different light, but just the state alone is not the pressing problem.