Palestine/Israel - what is the long-term answer to the situation?

I feel that through understanding and diplomacy peace can be reached. Ultimately Israel should return the occupied territories to the Palestinians, and in return the Palestinians need to stop their attacks. In the past the US has heavily supported Israel in a way I feel is biased and unfair - Israel is a powerful first world country that has taken land by force from an impoverished people. I think there is now a shift in US feeling and a solution may now be able to be found by appealing to moderates on both sides.