The way the British divied up the Ottoman Empire and the Middle-east in general, has caused many problems over the years in places other than just Palestine. Ethnic disputes, tribal disputes, religious and religious sect disputes and now oil all add up to make a hostile situation constantly in the making.
Also, trying to resolve a ethnic and religious issue with a political solution might not be the best approach. Probably why no lasting peace or border solution has been agreed upon by either side and is doubtful if any will ever be agreed upon.
Someone mentioned the Palestinians being used as pawns. Indeed, very poignant remark.
As to Obama's recent activities regarding Israel. I think he is coming to a conclusion I've often wondered myself that is basically saying: why exactly do we support Israel in the first place? Outside of it being a Democracy (sort of) and occasionally sending us intell through the Mossad what other purpose does it serve for the U.S.?