nottyboi, the Arabs are playing a bit of a coy game, don't you think? On the one hand they don't recognize Israel AT ALL, along any borders, whatsoever. Officially the Arabs don't believe any borders exist. None whatsoever. Yet then they turn around and complain that Israel is building settlements on the wrong side of--well on the wrong side of what? On the wrong side of a border they refuse to even admit exists?
Outside that region the rest of us mostly recognize that there should be a border between Israel and Palestine. The Israelis recognize that too, although they have encroached over it in various ways. The Palestinians simply don't recognize it at all.
From the Palestinian/Arab point of view the "land dispute" encompasses ALL of Israel.
In any case...
Regardless of where the various sides think the border should be, or whether they recognize each other's existence, attacks that target civilians are ALWAYS wrong. That is never an acceptable way to settle a dispute. Attack military targets, OK. Kidnap Israeli soldiers like Shalit--fine (though they should have given him ICRC access). But you do not attack civilians.
The democratic world, the world that believes in fundamental human rights, must crack down hard on terrorism wherever it raises its ugly head.
At the moment for whatever reason in the Israeli/Arab conflict the Arabs have chosen to operate primarily through terrorist attacks. Because of that choice that means they are pretty much in the wrong in EVERY Arab/Israeli encounter. That is because they have chosen to enbrace terrorism, and it is always wrong.
The Israelis walk a hard line, but they generally stay on the right side of the law with respect to who and what they attack--they target legitimate military installations. They go after them hard, perhaps harder than they should, but they are roughly following the law, and not outright embracing thuggery and terrorism the way the Palestinian side has.
Of course that could change. The Palestinians could, and should, embrace non-terrorist means to pursue the agenda. In that case it would not always be the case that they are morally wrong and Israel is morally right in most of their encounters.
But for the time being it is quite black and quite: Democracy versus terrorism.