I guess you didn't read about the deal. The deal divided Jerusalem based on who was living in each part. And West Jerusalem has been Israeli since 1949. Also worth considering is a chunk of the Old City was Jewish majority until Jordan's army ethnically cleansed the historic Jewish community in 1949.
And yes, Israel wanted to swap land for some settlements. Abbas claimed he was okay with the concept of land swaps so it was just a matter of negotiating which and how much land would be swapped. He chose not to negotiate though and instead waited until there was a new Israeli leadership Abbas knew wouldn't play ball, just so Abbas wouldn't have to deal with it.
Hamas has been clear that they will never accept a permanent peace with Israel existing. That was an issue for Palestinians to deal with in 2008, 2000, or 2025. Abbas rejecting a peace deal because he knew it would be hard to convince Palestinians that a Palestinian state is more important than simply getting rid of the Jews.
Again, the deal Olmert gave was:
- A completely contiguous Palestinian state with a land corridor to Gaza
- Land swaps of 6%
- Evacuation of small settlements
- Jurisdiction in Jerusalem based on the ethnicity of the majority in each neighbourhood
- shared/international sovereignty over the Holy Basin
- a small number of refugees would be allowed into Israel (which considering polling shows very few Palestinians want to become Israeli...)
- The rest receiving compensation and help if they wanted to settle in a third country or in the country they have spent their lives in.
All of this was thrown away by Abbas, in my opinion simply because he knew that after a century of promising Israel's elimination, he wouldn't be able to sell the idea.
Got to blame both sides and not just the Palestinians for scuppering the various negotiations.
The Likud party opposed any concessions just like Hamas did. Even The Labour Party were not too receptive to parts of the deal itself just like the PLO.
But from what I gather in history the actual ethnic cleansing occurred throughout what was then known as the Palestinian State between 1947-1949.
750,000 Palestinians out of 1.9 million were displaced in what was then known as The Nakba.
Jordan eventually took control of The West Bank and East Jerusalem including the Old City.
Then after the 6 day war in 1967, the Israelis took back Control of the West Bank, and East Jerusalem including the Old City.
They expelled around 300,000 Palestinians who were forced to flee to Jordan.
Complicated History that is around 3/4 of a century old that needs to be resolved into a two state solution.
