re: #2 sliv_the_eli

The fact is that a new Palestinian State would be a hostile state, as far as Israel is concerned. Presently, the PA relies on Israel for a number of services, including banking, which Israel feels obliged to provide.

Other items of note: Would the UNRWA finally leave the area? Would the foreign aid keep pouring in?

Most certainly, this would not lead to peace. Rockets would still be launched from Gaza, terror attacks would still be planned by the PA. The only thing that would change, is that no one else in the world has to officially care.