Let's face it. The last 60 years have been a disaster for the Middle East, and any action from either side can be "justified" with pointing at something the other side has done.
There have been attempts to make peace, but there have been too many demands that the other side can't accept. This can only be solved by one of the sides letting history be history and try to make a real attempt at peace. I think Israel, as the dominant party, should withdraw to the borders of 1967 and that the Palestinians should accept a multi-national peace keeping force that would stabilize the region and prevent further attacks on Israel.
It might take a couple of generations for the two sides to forgive each other, but it is worth a try.