If Hamas recognizes the right of Israel to exist, the walls will be broken and the major part of the settlements moved. Israel has shown several times that they can exchange land for peace, even within right wing governments.
Arafat got at least two offers for a Palestinian state (at Camp David and once later), with about 91% of the West Bank iirc.
The later offer was when Barak needed Arafat's support of a peace agreement before an election (so the Palestinian side had a good negotiating position).
Arafat didn't accept either -- which was one thing. But there was no counter offer like "Give us XX and YY and customs advantages ZZ and ...". Instead Arafat started a terror campaign.
But there is no blame for all that refusal to even give a counter proposal; it is all a big Israeli conspiracy.
(Seriously, I feel a bit sick when I chat with hateful people.)
The lies you are talking about are just part of a long term negotiation until Hamas recognizes the right of Israel to exist and live in peace. Once this milestone is achieved, Israel will not have any excuse to move forward with the peace process because the Israelis, and the jewish people will not tolerate more excuses.