That's a good idea. But you've got to think logistics, too. First of all, they've been to the talking table a million times. They feel so strongly on some issues that they absolutely will not give in on them. So they continue to fight over it.
Saying "let's talk about it" isn't enough to solve the problem. It has been tried again and again to no avail. When you try somethinga million times and it doesn't work, it's time to try something new.
To stop the current flow of violence, a great deal of strong pressure must come from both sides to hold back and cut back on attacks. Arafat will have to appease Israel by
cracking down (effectively) and restraining militants. Sharon has to restrain from targetting militant leaders and other antagonistic measures towards the Palestinians.
I think both sides have a mentality which leaves them feeling victimised and alienated. "Let's talk" probably won't work. That said this violence and not talking has gone on long enough and both sides have to return to the table sooner and later (international pressure might help). With the Palestinian side, an indirect societal approach could be taken to clean up the corruption and mismanagement of funds amongst Palestinian officials. Basically create jobs, clean up corruption (as well as the leadership), get people out of refugee status, stem the flow of vicious rhetoric (this probably goes for Israel and all intermediearies as well) and misinformation and thus, create a social base which will alienate militancy (and grasss roots support for such), create a sense of dignity/confidence and create tolerance for peace.
The problem is logistics (you're right) and the idea that this doesn't seem like the job of outsiders but Palestinians (although I think that greater contxt of peace is more important). However, money isn't a problem (AFAIK), seeing as the will to provide money is there and money is provided, it is matter of making sure that oney is spent appropriately (this could be combatted by checking where the money is spent, attaching strings to it and by placing it in the hands of repsected/independent or more pacific activist leaders).
To criticise the role of Arab leaders, they could do more to incorporate their own Palestinian populations (not that I am making a case for Palestinian refugees to not return, that is an inalienable right, it is simply an indication of the reality that despite the rhetorical support for the Palestian cause, Arab leaders and governments have a hypocritical approach to Palestinians). Financial support from them is also shortcoming and trickles down. They could also lean on Arafat to clean up his govt.
Sanctions, pressure from other countries (not just the US or Arab world)...some sort of combination that gets these leaders thinking. Those are war alternatives. Education is another. If a plan can be devised from these sorts of things, and it saves lives, that would be awesome. How and what do you implement?
Sanctions usually don't work. I can't think of an instance where they have worked (Libya, perhaps, althought hat took way too long). Besides, the social cost is too great. Diplomatic, financial pressure oculd work (although they would have to be employed in a manner that does not create a ffeling or atmosphere of isolation). I think some kind of technocratic/professional think tank could come up with a plan where both sides could grant concessions to each other (as far as violence is concerned), restrain themselves and rekindle the peace process.
Also, what do you do when you can't negotiate? Remember Chamberlain achieved "Peace in our time" by negotiating with Hitler...some leaders are just mad. I'm not saying that is the case with Sharon or Arafat.
They have to negotiate at some point (the alternative being unconscionable). The question that coems to mind now is - Does Israel feel secure enough to return to the epace process?
I don't expect you to have a definite answer, I mean, I don't either. I just mean to think aloud about them, not to try and get an answer. Of course, if you have one, that's good too
If only.