1 of your problems is the fact that you have this strange impression that reports originating from the Palestinians, should be treated with equal weight as reports originating from Israeli media sources.
In other words, this: "on the one hand, Israel says that..."..."but on the other hand, the Palestinains claim that..." is a terribly wrong approach for one who wishes to understand the situation.
No, my approach is not based upon racism. It is based upon the knowledge that Israel is a democracy who's national unofficial pass time is criticizing the government (nobody hates the Jews more than the Jewish bull shit artist liberals, no one), and the PA is a totalitarian regime at its worst. Worse than Saddam Hussein's one, that's for sure.
Until you come to an understanding that, just as you treat reports from Bin-Laden with extreme caution (to a point where Bush called them "irrelevant") while treating reports from the US media with great admiration and respect (as you should), such is the case when judging Israeli words vs. Palestinian words, until you do that, you will not get to the bottom of what is going on here.
On a different mater, you write a lot about the terrible living conditions on the streets of Palestinian ruled areas. Believe me, as someone who was actually in those streets, as opposed to you, when I say that you are perfectly right! Life there is hell! I am the 1st to admit that.
However, this hell was created mostly due to the dictator/arch-terrorist Arafat, who himself lives in gigantic palaces coated with gold and marble, and works from offices that wouldn't be looked down on by any western leader out there. Arafat had 9 years, 1993-2002 to make good use of the fact he was given full control over 90% of the Palestinian population, with the future potential of ruling over 95% of the territory he CLAIMS to be under dispute (since he is not fighting over the 67 borders, but rather over the 1948 borders, and although this remark of mine is enclosed in parenthesis, it's the most important remark in this post). Arafat didn't invest 1 penny in health services (except for ambulances that transfer suicide belts under fakely injured people), education (except for hatred towards Israel and the US, of course, that's where he saved no expense), or economy which will bring any benefit to the common muhammad on the street (and not to him and his gang).
Arafat WANTS his people to live in 1 big garbage dump, as do the rest of the arab leaders.
Why, suppose his people start living like normal human beings...where will all the hatred and animosity be pointed at? at HIM! for being such a corrupt rich bastard on their expense! they might even start criticizing his leadership and demand his replace? But, you see, as long as there is a small devil (=Israel) and a big devil (=the US) he's safe. He can always blame the Israelis and Americans for their situation, right?
You just do not understand who we're dealing with here. YET.