But we have one side ready for peaceful coexistence and the other side who wants only the total destruction of their enemies.
If you watch it for a few decades you will see the sides alternating, when Israel makes a peaceful move in conjunction with Fatah, Hamas retaliates with rockets. When Hamas declares and keeps a 2yr ceasefire, Israel lays the boots in. Israel does want a 2 state solution but only if they can veto who's running it, in the meantime they call it an occupation territory so that it doesn't screw up the demographics of a jewish state, similar to the way S.Africa denied the black a vote to keep their "white demographic" intact. Fatah has been widely seen as Israeli puppets by people in Gaza since the death of Arafat. The Israelis came close to a resolution with Arafat in the 90's but he backed out at the last minute over the "right of return", Arafat wasn't the only one punished because of that act of political disobedience.
The situation also has similarities with the British occupation of Ireland in the early 20th century, the Brits solved that mess in the 80's and 90's by talking the high moral ground of allowing full participation on the political side while simultaneously infiltrating the IRA and bringing members of the military wing to justice via criminal courts and local police. Trust has to start somewhere and Israel are supposed to be the grown up government in this equation.
Hamas cannot defeat Israel, from a purely militarily POV Hamas is a nuisance largely of Israel's and Egypt's own making. When will Isreali soldiers follow the lead of the Brits in 1980's N. Ireland and remove their riot helmets while on street patrol. Replace the live ammo with rubber, swap real cannons for water cannons, stop shifting the border, stop evicting people and bulldozing homes that have been occupied for centuries by the same family, bring your own extremist dogs to heal to show the palestinians how it's done.