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Israel abuzz with Obama Plan rumors

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The capital of the Palestinian state would be in East Jerusalem, which is currently under Israeli control. Most controversially, the plan includes a proposal that the Old City – with sites holy to the three major monotheistic religions – would become an international zone under the flag of the United Nations. Such an arrangement was proposed in the 1947 UN partition plan but was never implemented.

Mayor: Splitting Jerusalem is 'wishful thinking'

The status of Jerusalem and the Palestinian refugee issue have in the past been major deal-breakers.

Mkhaimar Abusada, a political scientist at Al-Azhar University in Gaza, says that on the issue of refugees, many Palestinians are prepared for realistic solutions.

"Most people know that they will not see the return of millions of Palestinians into Israel, or what's known as historic Palestine," he says. "Deep in our hearts we know it isn't possible, but people would like to see an acknowledgement of Israel's moral and historic responsbility."

But the idea of putting the holy sites of Jerusalem under international control is something Hamas, he says, as well as many other Muslims, will not accept.

"Palestinians would more likely accept this formula on the refugee than it would the internationalization of Jerusalem. Jerusalem is full of Islamic holy places over which Palestinains are not ready to make concessions," Dr. Abusada says.

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