From an excellent analysis in Think-Israel, by Alex Grobman (brief excerpts only - follow the link to the full paper with references):
Even if the Obama administration were to succeed in compelling Israel to accept a two-state solution and stop building settlements in Judea and Samaria, this would not placate the Arabs or ensure peace in the region. Before embracing the idea of a Palestinian state, we should ask why the Arabs have consistently opposed partition, and examine the origin of the "Two-State Solution."
When the Peel Commission recommended partition in July 1937, the Arabs immediately repudiated the British plan....
After almost 30 years of futile attempts to bring peace between the Jews and Arabs...A Joint Memorandum of January 6, 1947 submitted to the British Cabinet by the British Secretary of State for Foreign Affairs and the Secretary of State for the Colonies found the Arabs "implacably opposed to the creation of a Jewish State in any part of Palestine, and they will go to any lengths to prevent it."
....Undeterred by Arab opposition, two-thirds of the members of the U.N.'s General Assembly recommended on November 29, 1947 to partition Palestine into two independent states — one Arab and one Jewish. The Arab U.N. delegates did not accept the "validity" of the resolution...The next day, seven Jews were killed by an Arab ambush in response. Dr. Hussein Khalidi, acting chairman of the Palestine Arab Higher Committee (AHC), called for an Arab boycott of all Jews, warned that any attempt to enforce partition would "lead to a 'crusade' against the Jews," and "may even be a spark that will lead to another world disaster." Arabs were "prepared to meet their challenge," Khalidi acknowledged and "fight for every inch of our country."
...On February 6, 1948 [Haj Amin al-]Husseini, representing the AHC, wrote to U.N. Secretary-General Trygve Lie that, "The Arabs of Palestine...will never submit or yield to any Power going to Palestine to enforce partition. The only way to establish partition is first to wipe them out — man, woman and child," which is precisely what the Arabs had planned for the Jews...
Why Can't the Arabs Accept a Jewish state?
Throughout the intervening years, the Arabs have not stopped trying to eliminate Israel. Though they live in a number of different sovereign states, the Arabs view themselves as part of a single Arab Nation ...
...The "de-Arabization of Arab territory" in Palestine is viewed as a breach of the unity of the Arab people ...and "an affront to the "dignity of the [Arab] Nation."
... the Arabs regard themselves as the only "legitimate repository of national self-determination" in the Middle East. ...Arab repudiation of Israel's legitimate right to exist is part of this deep-seated belief that only Arabs are entitled to have a nation-state in the Middle East.
A People's War
Arab failure to destroy Israel by force has led the Arabs to adopt the Marxist-Leninist "people's war" strategy employing political and military methods used so effectively in China and Vietnam, according to historian Joel Fishman. Since the late 1960s, the political campaign has sought to divide Israeli society and delegitimize the country through incitement in Arab textbooks and media, and demonize her at the U.N. by branding Israel a racist and pariah state.
Part of this political strategy was to sign the Oslo Accords in order to secure land from which to launch a guerilla war to demolish the Jewish state and replace it with an Arab one. The late Faisal Husseini, Palestinian Authority Minister for Jerusalem Affairs, called this ruse a "Trojan Horse. "
Husseini urged the Arabs "to look at the Oslo Agreement and at other agreements as 'temporary procedures, or phased goals,' this means we are ambushing the Israelis and cheating them. Our ultimate goal is [still] the liberation of all historical Palestine from the [Jordan] River to the [Mediterranean] Sea, even if this means that the conflict will last for another thousand years or for many generations." The negotiations were a means toward "an extension of continuing conflict and not an opportunity for two peoples to reach a new rapprochement."
....At the Fatah's Sixth General Congress in August  in Bethlehem, the first since 1989, the debate over strategy continued. Palestinian Authority President Mahmoud Abbas declared that "although peace is our choice, we reserve the right to resistance, legitimate under international law."
Tawfiq Tirawi, security advisor to Abbas, disagreed that peace would be achieved through negotiation: "Words are ineffective. Action is effective." Fruitless discussions "go on for decades." The only way the Arab refugees will be returned and Jerusalem restored will be through the efforts of "thousands of martyrs."
In an interview in pan-Arab daily Al-Quds al-Arabi, Rafik Natseh, a member of Fatah's Central Committee and considered a "moderate," concurred. Fatah, he said, had never relinquished the armed struggle. Muhammad Dahlan, senior Palestine Authority official, made a similar pronouncement.
Use of Terror
In an obvious attempt to defuse criticism of Arab homicide bombings and indiscriminate missile attacks against Israeli civilians, Abbas renounced "all forms of terrorism," but rejected "stigmatizing" their "legitimate struggle as terrorism."
In an interview with Jordanian newspaper Al-Dustur in 2008, however, Abbas explained the reason the PA did not engage in terror was not because they opposed violence, but because they were "unable" to mount attacks at that time: "Now we are against armed conflict because we are unable. In the future stages, things may be different. ...
In an interview on PA TV on July 7, 2009, Fatah activist Kifah Radaydeh made the same point. Violence would be renewed, she said, when Fatah was "capable," and "according to what seems right...It has been said that we are negotiating for peace, but our goal has never been peace. Peace is a means; and the goal is Palestine. I do not negotiate in order to achieve peace. I negotiate for Palestine, in order to achieve a state."
This goal is shared by members at the Congress. When Abu Alaa (Ahmed Qurei), former Palestine Authority prime minister and current Chairman of Fatah Department for Recruitment and Organization, announced the presence of two terrorists in the audience of the conference they were roundly applauded.
....The Arabs believe they have a "legal right" to use terror if orchestrated by PA leadership at an appropriate time and location. Should they exercise their "legal right" to attack Israel, troops trained by US Lt. General Keith Dayton would be employed.
Refusal to Recognize Israel
With regard to acknowledging Israel, Rafik Natseh declared unequivocally that Fatah "does not recognize Israel's right to exist." ...Muhammad Dahlan adamantly underscored this point when he said, "I want to say for the thousandth time, in my own name and in the name of all my fellow members of the Fatah movement... the Fatah movement does not recognize Israel..."...
When Will It Ever End
Despite the myriad of government commissions and official emissaries that have sought a solution to the Arab/Israeli conflict, the dispute remains intractable. Nothing will change so long as the West fails to treat the Arab world as they would any other European nation. Making excuses for Arab intransigence, blaming Israel and trying to force her to give up land that is legally and morally hers will not end the conflict.
If any nations in Central Europe had proclaimed that they were the only rightful nation-state in the region as the Arabs have, the country would be vilified as racist, elitist, hegemonic, and seen as potentially dangerous. For the last two centuries, the claim of having the exclusive right to statehood and autonomy has been the source for the many wars, carnage and mass destruction in Europe. This discredited concept, which is at the core of the problem of Arab nationalism, has been abandoned in Europe.
The Arabs have not yet accepted the national rights of the Jews and the other minorities in their midst.