From the Institute for National Security Studies, Tel Aviv University, by Ephraim Kam [Synopsis only - follow the link to download the full 10-page paper - SL]:
Since the 1970s and especially since the early 1980s, important changes have occurred in the Arab world's attitude to Israel.
First of all, most Arab leaders, state and non-state alike, have gradually reached the conclusion that Israel is a fact and cannot be destroyed, both because of its military power and due to the steady commitment of the U.S. to its existence and security.
Furthermore, Egypt's - followed by Jordan's - choice of peace with Israel and withdrawal from the cycle of war, combined with Iraq's downfall in its wars with Iran (1980s) and the West (1991 and 2003), have prevented the formation of an Arab military front against Israel.
The collapse of the Soviet Union dealt the final blow to the military option against Israel by depriving Syria of strategic superpower backing, and leaving the U.S., with its special relationship with Israel, as the sole superpower.
These developments led to the realization among Arab leaders that the conflict with Israel should be ended through diplomacy, because war was neither practical nor to the Arabs' benefit.
In the first half of the 1990s, the very existence of a Palestinian diplomatic channel has contributed to the legitimacy of dialogue with Israel and the creation among moderate Arab governments of an interest in encouraging this process.
In all probability, however, inclusion of the Arab world in the peace process can probably take place only after the direct principals in the negotiations - Israel, the Palestinians, and Syria - achieve real progress on their own, which the Arab world can then complement.