The Saudi proposals in Taif in 2002 remain the best put forward to bring the Israelis and Arabs to some sort of modus vivendi.
" o be sure, there is not likely to be an open rapprochement between Israel and Saudi Arabia anytime soon, but a hugfest is not necessarily what's needed. The Israelis and Saudis already seem to be working together behind the scenes on matters of state security; there is ample reason they could soon be working together behind the scenes on matters of peace. It's true that the Saudis fund some of Israel's worst enemies, but this may be largely to maintain their influence in the region--which is leagues better for Israel than allowing them to cede their influence to the Iranians. It's also true that, even if a reworked version of the Saudi plan were officially offered to the Israelis, they might reject it as they did in 2002. But reports in several newspapers have indicated that this new version may address the obstacles that stymied the plan from an Israeli perspective last time.
Olmert has serious political problems in the perception that he is not up to the job. He may be willing to roll the dice.