Obstacle to peace

It is taken as an indisputable fact by many that the biggest obstacle to peace between Israel and the Palestinians is the existence and continued construction of Jewish settlements in the disputed territories beyond the 1949 armistice line. I must admit this outlook has always puzzled me as it is based on two fundamental assertions: 1) Jewish settlements are illegal and 2) Jews (mind you, not Israelis, but specifically Jews) will not/must not be allowed to live in the newly created Palestinian state. The first assertion is factually false (please see Caroline Glick’s article), while the second is so openly racist that it can’t possibly be acceptable in a civilized world. So how did it become commonly accepted among people who would be appalled by similar attitudes anywhere in the world but in Jerusalem, Judea and Samaria, that Jews should be deprived of their legally acquired property, thrown out of their homes and never allowed to come back? The way I see it, the true obstacle to peace in the Middle East is the prevalence of such mindset among Arabs.