Israel has returned confiscated land exactly twice in history, both for tactical reasons. The Sinai was too big to hold onto indefinitely, not worth the military resources that would have been required. The return was worth more to them as a PR deal, than it was for military security. And at any rate, they no longer needed security from Egypt, as the US had stepped in, and essentially bought off the Egyptians as a gift to Israel. Gaza, already an overpopulated concentration camp, was not a reasonble possiblity for Jewish settlement. It was better managed from outside the wire than within.
At Oslo, and the other various peace negociations, Palestine was never offered anything other than a South African, bantustan style of existence, with a cut up, rump leftover of what was once all theirs. That's why Arab negociators never accepted the deal. They knew that the population at large would never go for it. They understood history, and the emotional currents that ran through the region.
Israel has consistently refused to negociate in good faith in recent years, for two main reasons. One- they have the unquestioning backing of the US, achieved through bribery, and the bedazzlement of the less informed, such as yourself. Two- through the monopoly on nuclear weapons in the region, which is why they are so worked up about Iran, whose nuclear program will change the dynamics of the region.
