True. And it's rather sad that they do, given that Israel's interests in the middle east are generally about not having their citizens murdered in the street.
That's what they say, but when I read stories about them demolishing Palestinian neighborhoods, billing them for it, and building real-estate developments over the "confiscated" land the whole "we just want peace" line starts to smell like a rationalization at best and more probably a flat-out excuse.
Settlements are built on undeveloped land. Some urban settlements (East Jerusalem, Hebron) are in houses purchased from their Palestinian owners. These usually entail a lengthy legal process, but settlers are forbidden from entering before it has resolved (just this week some settlers in Hebron were removed from houses they claim to have bought legally, the case is in court).