If the Jews had lost the wars, the world opinion would have been with them. These poor people, they suffered the Holocaust and now they are under the Arab heel. But the Jews refused to do that, and it doesn't sit well with the world. The Jews are liked in as far as they are weak. Europe would love nothing better than to be able to support the struggling Jews to make up for its complacency during the Holocaust, but the Jews denied them this opportunity. Instead of being helpless victims, they actually stand up for themselves, defend what's theirs, and in general refuse to be pitiful. How that irks the world. How dare the Jews not need our help!? But, gotta help somebody, so we need to find the victim. Who's the victim? Well, if it ain't the Jews, it's gotta be the poor Arabs.
This, of course, leads to all kinds of nuances. To see the Arab world as victims, we need to see them as children. They aren't responsible for what happens to them, only the other party is. To propose that the Palestinians are suffering as the result of what Arabs did is, then, blaming the victim. We can't do that! Nor can we say they're assholes for terrorism. They are just little children, who're driven to their actions by bad adults. This absolves the Arabs of all responsibility, but then they complain that the west doesn't respect them. Can't have it both ways, I suppose.
The Palestinians have learned to thrive in that environment. They learned that they are seen as kids, and as kids, they don't have to make strong arguments to get their point across. Instead, they have to point to a boo boo and say it hurts, and the world will shout at the perceived abusive adult, regardless of what actually happened.
The situation with the settlers is messy, but there could be deeper analysis given to it than most people have given it. The settlements are an obstacle to Palestinian state, sure. But they are not a bigger obstacle to the Palestinian state than the Palestinians themselves are, so let's not put all the blame for the suffering of the Palestinians on the settlers.
People like to call settlements illegal, but they are not. The basis for "illegality" (not that most people even know that) is a UN resolution calling for Israeli withdrawal from the occupied territories AND Arab recognition of Israel. Since the Arabs have not done what they have been called on to do, we can't expect Israel to do so. The resolution was based on the idea that Israel won't need the territories for security reasons if its neighbors recognize it. Since that hasn't happened, Israel has legitimate right to occupy the territories, at least as far as the UN resolution goes.
Now, there are some people in Israel who care about their religion and its holly places. They aren't well liked by their compatriots, and if it really came down to peace with the Arabs and security, or supporting the settlers, the Israelis would yank the settlers out. But they are pragmatic, too, and they know that it won't be any time soon that a decision like this would have to be made. And so, why would they restrain their own people "to be nice" to the other side, while the other side would show them no consideration, settlers or not. The Israelis allow Arabs/Muslims free access to their holly sites on Israeli land, but of course the Palestinians can't be expected to reciprocate. So some people think it's worthwhile to live near those sites and protect them with their presence. All other things being equal, I would say "screw the holly sites," they aren't worth continuing strife. But pragmatically, it would make no difference. The Arabs aren't angry at Israel because of the settlers, they are angry at it because it exists. So even as settlers may be irritating to them, they don't have a grand difference in the general scheme of things, and there's very little reason for Israel to curb them.